Oil crisis, schmoil crisis; gasoline is still cheaper than milk

(or, why the sky isn't falling (again))

Yup, it's true; gasoline is cheaper than milk. In fact, gasoline is cheaper by volume than practically any liquid you can buy in a grocery store, including (bottled) water. Here are some numbers, in US$ per gallon:
Date   Belgium  France  Germany Italy  Netherlands U.K. U.S.
1/1/96 3.95     3.93    4.07    3.89   4.32        3.20 1.27
1/6/97 4.21     4.01    3.83    4.18   4.29        3.74 1.41
1/5/98 3.47     3.51    3.30    3.57   3.59        3.78 1.29
1/4/99 3.52     3.58    3.34    3.63   3.77        3.83 1.13
1/3/00 3.34     3.57    3.52    3.54   3.78        4.17 1.46
7/3/00 4.01     4.14    3.79    4.04   4.40        4.88 1.79
9/18/00 3.47    3.70    3.47    3.63   3.91        4.24 1.73

(reference: U.S. Department of Energy
For comparison, a gallon of milk goes for about $3.40, and a gallon of Coca-Cola goes for about $2.00.

What are the numbers telling us? Mainly it's telling us that it could be, indeed has been, worse, particularly in Europe. In other words, this crisis is seriously overblown. We survived higher prices earlier this year, we survived them in previous years, and we'll survive them if they continue to rise this month (which is debatable by itself--NPR's Marketplace is reporting that crude oil prices fell today). Rhetoric from the U.S. Presidential candidates notwithstanding, the sky is not falling. I think much of the perception of crisis is due to us having been spoiled by a long run of cheap oil. Nevertheless, we all knew the party had to end some day. It's time to suck it up and deal.

I am troubled by all the panic politics surrounding the oil issue this year. We've seen talking heads on the TV propose releasing the strategic oil reserve (Hello? That's supposed to be for real emergencies, like an embargo), cutting the nickel-a-gallon gas tax (math quiz: what's the largest effect that could possibly have on the price of gas?), and tax credits for oil companies (like consumers will ever see any of that; haven't these clowns ever heard of elasticity of demand?). Of all the proposals, improving domestic production might be worthwhile in the medium term, but that is something that needs to be judged on the costs and benefits of exploiting those oil fields, not as a panic response to this tempest in a teapot.

Developing alternative energy resources would be a very forward-thinking program, but to be honest I think this non-crisis will have zero effect on alternative energy research. The problem is that practical alternative energy is at least a decade away. We won't even remember the "crisis of 2000" by then. As with exploring additional petroleum reserves, it's a decision that has to be made on its own costs and benefits, not on its purported effect on fuel prices today.

The problem I see with alternative energy research is that right now it's cheaper to go the petroleum route, and petroleum pays off in the shorter term to boot. That means that developing alternative energy is going to require a strong political comitment; economics alone won't do it. Given the generally spineless leadership we've come to expect from the two major parties in the U.S., I'm not optimistic about our chances of mustering that kind of political will any time soon. I think the oil situation will have to get a lot worse before we'll see a serious push for nonfossil fuels in this country.

And that's my $0.02 (0.0116 gallons of petrol, evidently).

re: thopkins' comment: the proposal was only to repeal part of the gas tax, not the whole thing. See, e.g.