Inflation Update - As Applied to Gasoline

Here's an update to the price of gasoline, originally posted on September 5, 2008 at another blog:

Link to Gasoline Prices September 2008

This is based upon the gasoline receipts for one of my automobiles. As a hobby, I collect data on certain things. In finances, that includes my household's "consumption and spending habits". I use several tools; this chart was created using data entered in a spreadsheet. I update it monthly using my gasoline receipts. Why do this? If you don't, won't or can't measure something then you certainly can't control it. Or, as we used to say in the early days of mini-computing "garbage in = garbage out". Some truisms are universal, but we are at a point in our development as a culture where we have forgotten how we got to where we currently are. Too bad for our future generations.

Some background information:
Total miles driven = 79117
Total gallons used = 3480.1312

There are two lines on the graph. The red line is the actual price of gasoline from the period February 3, 2005 through March 12, 2010. The black line is a trend line, which displays the actual trend in prices and as you can see, is trending mildly upwards. I also calculated the average of prices on an annual basis and compared those averages to determine the price increase per year. These annual price increases were then compared to determine the percent price per year.

Average cost per gallon annually was:
2005 = $2.50
2006 = $2.74
2007 = $3.04
2008 = $3.24
2009 = $2.68

The interesting thing here is that the price of gasoline has been increasing at a rate of about 2.2% per year, which is in line with the very low inflation we have been experiencing. Average inflation is usually in the range of 3.0 to 4.0% per year.  The averages, however can be deceiving. Do you remember the angst in 2007 and 2008 when gasoline prices "spiked"? Peak price I paid per gallon was $4.419. Even so, the average increase in gasoline prices per year, 2005 to the present, are low, less than 3% annually! What this means to the consumer it that when economists speak of "averages" it is useful to be aware that these averages can include severe periods of higher or lower numbers. So while the average is benign, the spikes are painful. Moral: "Be Prepared". Today's low prices will be replaced with higher prices in the future. So don't spend those savings acquired by low prices. Save them for the day when prices return to the normal rate of inflation, which is possibly as near to today as those July 2008 price spikes. If they are, then we could again face rising prices in the summer of 2012, or sooner. As the "experts" say, economics forecasting is not an exact science.

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References, Errors, Omissions, Comments:

1) I added additional information regarding annual increases and an explanation of the trend line or "Linear" line on the chart.  

2) On April 13 I updated the actual miles driven and gallons purchased.