$2.37 and counting
After driving some 1300 miles across the midwest over the past two days, the big spike in gas prices has hit my wallet a little harder than most. Yet even though crude oil on the NYMEX is over $64/barrel, one is constantly met by the rejoinder that "things were worse in 1981" when the real price of oil was near $90/barrel in current dollars.
So are gas prices really much ado about nothing? In March 1981 the US national average for a gallon of gasoline topped out at $1.38. Using the CPI as a deflator, that comes out to $1.56/gal. in constant 1982-84 dollars. The current national average is $2.37/gal. That's around $1.20/gal. in 1982-84 dollars (hard to say precisely since we don't have the July or August CPI data yet). Per the CPI, gasoline in current terms will have to reach ~$3/gal. to be an all-time record.
If you prefer the PCE price index, however, we're not nearly that far away from 1981. In constant 2000 dollars, the 1981 price was $2.47/gal. while current prices are around $2.10/gal. In current terms, gasoline will only have to reach ~$2.75/gal. to be a record.
So while crude oil prices are currently around 70% of their real record high, gasoline prices are around 80% of the real record per the CPI and 85% per the PCE index. Things were worse in 1981 -- and today's price of gasoline is worse than crude oil.