By DAVID MOON, Moon Capital Management
You may not have realized it, but gasoline isn't the only consumer product
flirting with all-time high prices. Houses and automobiles have never been
this expensive. Milk costs $3 a gallon ' more at the convenience store
near my house. NASCAR and UT football tickets have never been
higher. Core inflation (which excludes energy prices) just hit a
Why all the drama surrounding gas prices?
Admittedly, prices at the pump have risen 20 percent in the last few
weeks. But in the last year, the price of framing lumber is up 30
percent. Housing ranks pretty close to transportation as a necessity, so
where are all of the panicked live television news reports broadcast from lumber
yards or new housing developments?
When observing changes in the price of milk or automobiles, consumers are
much more willing to mentally accommodate inflation ' the general tendency of
prices to rise. Since 1920, if gasoline prices had increased at the same
rate as have wages, gas would now cost $10 a gallon, excluding taxes.
Adjusted for inflation, gasoline prices have steadily declined since the 1920s,
with the obvious exception of the 1970s. Crude oil is cheaper today, in
real terms, than both 50 and 100 years ago.
The justifications for
gas paranoia are multiple. Some people simply hate the internal combustion
engine and consider it a moral threat to humanity. Others are fearful of
our seeming dependence on an area of the world that generally hates the
US. Some people assume any man's riches must come at the expense of
another, so they hate the oil industry simply because of its money. Some
folks believe no one should be allowed to drive an SUV the size of a tour bus,
consuming valuable natural resources.
Higher gasoline prices increase personal budget pressures on everyone.
But there is a strange disconnect between the real relative impact of those
price changes and the passion with which some people react to those
Lumber isn't nearly as political as oil.
Although there probably are people who would oppose cutting timber under any
circumstance, the logging industry's foes pale in comparison to those of the oil
industry. When lumber prices spike, most people consider it a fact of life
and make decisions accordingly. (Of course, most people buy gas more
frequently than they do 2x4s. But lumber price increases are felt by
anyone who owns or rents a home, as those prices ultimately impact new
construction costs and ultimately, rents and existing home prices.)
Despite the declaration of a recent New York Times article, our energy
resources are not 'running on empty.' Geologists continue to locate new
reserves, and extraction methods continue to decline in both environmental
invasiveness and cost.
Gasoline is a political flash point; the furor otherwise makes no
David Moon is president of Moon Capital Management, a
Knoxville-based investment management firm. This article
originally appeared in the News Sentinel (Knoxville, TN).