Perspective on gas prices.

ITEM: Reuters on May 20 said of the high cost of gasoline: "U.S. retail gasoline prices have topped $2 per gallon. On Wednesday, gasoline futures on the New York Mercantile Exchange traded as high as $1.45 a gallon--a new record--amid supply fears ahead of the U.S. summer driving season ."

BETWEEN THE LINES: If you do not take inflation into account when making historical comparisons, you could probably claim most prices are at a record high. Yet, when this adjustment is made, gasoline prices are at about their historic average.

Adjusted for today's prices, gasoline reached about $2.99 per gallon in March of 1981, according to the Department of Energy. Columnist Stephen Moore notes that the real price of gasoline during the 1920s, excluding taxes, was twice as high as it is now. Indeed, says Moore, "If gas prices were as high today as they were in the late 1970s, we would now be paying about $6 a gallon for gas."

Technology in the meantime has improved fuel efficiency. Former Delaware Governor Pete du Pont has described how the number of miles one can drive on a gallon has jumped from about 13.5 in the early 1970s to 22 in 2000. "So the cost of gasoline per mile driven has fallen nearly in half...."

Nevertheless, even though the price of gasoline is still far below historic highs in terms of constant dollars, it is still much higher than would be the case if government did not inflate the price through regulations (including restrictions on drilling) and excise taxes. State and federal taxes now average almost 43 cents per gallon, compared to 30 cents in 1981.

Ironically, the Reuters story quoted above criticized President Bush for not doing enough to bring down the price of gasoline. (Wouldn't it be wonderful if the government were to do less, allowing free enterprise to do more!) And it quoted a spokesman for John Kerry as complaining: "Once again, the president is making excuses instead of coming up with a plan to deal with gasoline price rises that are roiling the economy." The Reuters story failed to point out that in 1994 the Massachusetts senator, in inflation-adjusted dollars, was promoting $2-a-gallon gasoline.

Costs are also being driven up by boutique fuels and regulatory add-ons. For example, requiring reformulated oxygenated gasoline has increased prices by 4 to 8 cents per gallon, according to the Federal Trade Commission. In the wings is a new national low-sulfur regulation, which is expected to cost the industry some $8 billion over the next three years. Guess who will ultimately pay for that?