Sunday, January 08, 2006

Gas Prices vs. Home Values

If you remember back in the summer, gas prices increased by about 35% nationwide in the month of August, mostly because of Hurricane Katrina. This was almost unheard of in U.S. history. All the politicians were running around like headless chicken trying to "fix the problem" and satisfy their constituents. As they were busy writing up emergency legislation, discussing price controls, and calling heads of oil companies in front of Congress for price gouging investigations, the prices had already started dropping, all without any government intervention. Millions of dollars of government money was spent trying to figure out how to "solve the problem". And before any government policy shifts could get off the ground, the problem was solving itself.

No, gas prices never returned to 2004 levels, but they are a lot lower now than they were.

The U.S. House of Representatives, the N.Y. Times, and Bill O'Reilly were absolutely hysterical in their wild accusations of price gouging by oil companies...only because prices went up. They had no proof whatsoever, but they were already on the witch-hunt, calling for CEO resignations and emergency law passage. And as prices trickled down, did you hear anything from them? Were they calling for investigations into why prices were dropping?

It's funny how some people go ballistic over a price increase over one commodity, but you don't hear a peep of concern over the much faster growing prices in other commodities, like real estate.

Between 1940 and 2000, the average home value in the U.S. increased by a factor of 40.7.

Between 1940 and 2000, average gas prices increased by a factor of only 8.3.

So real estate prices are increasing nearly 5 times as fast as gasoline prices. Hmm. How could this be? How could it be that so many people are so upset over gas prices, when real estate prices are increasing so much faster?

It's all about what people have a stake in. All the House members, the editorial staff at the N.Y. Times, and Bill O'Reilly all own homes. But very few of them own shares of oil companies. So in essence, they aren't upset that gas prices are going up; they're upset that somebody else is profiting from the higher prices.

I'd like to see a report on how much a full-page ad in the N.Y. Times or a 30-second spot on TV has increased since 1940. Wouldn't you? Hypocrisy knows no bounds.