05 July 2006

How Prescient We Were: "$3 Gas is Cheap"

In September 2005, the FR commented that $3 per gallon of gas in the United States is quite cheap relative to what we can afford to pay. This summer's travel season has certainly proved us right. Freeways and streets continue to be gridlocked as more people than ever take to the roads with SUVs and other motor vehicles.

As oil prices surpassed $75 per barrel today, we note that the market has agreed with our 2005 analysis that the average American can afford to pay more than $3 per gallon of gas -- perhaps even $7 per gallon.

So for all these years of $1.25 gas or even $2.25 gas, the American people have been robbing their government blind. All this time, we should have been paying $7 per gallon of gas because this is our affordability threshold.

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