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Economist: Iowa’s record gasoline prices aren’t really records, when adjusted

AMES — It won’t likely make Iowans feel any better about paying more than four bucks a gallon for gasoline, but those record high prices aren’t really so high, nor are they records, according to one expert.

Herman Quirmbach, a retired economics professor at Iowa State University, says last week’s gasoline prices are indeed more expensive than the previous highest-ever prices dating back to July of 2008, but he says it’s not apples to apples.

“When you’re comparing prices of products over gaps of many years, you have to adjust for the purchasing power of the dollar,” Quirmbach says. “The dollar back in 2008, which was the previous quote-unquote record, that dollar bought a lot more.”

AAA-Iowa says the statewide average for gas on Friday was $4.13 a gallon. Earlier last week, the high prices wiped out the previous high price from 2008 of $4.02 a gallon. In today’s dollars, Quirmbach says that $4.02 would actually be more like $5.28.

“If you’re going to make comparisons to what was available in the past, you have to do it on a purchasing power adjusted basis,” Quirmbach says. “On that basis, even with the new figure today, we’re more than a dollar short of what the real price, what economists call the ‘real’ price, of gasoline was back in 2008.”

Quirmbach, a state senator from Ames and a Democrat, says multiple factors go into the price of gas, even though it’s often reduced to being a political football.

“As long as this war is going on in Ukraine, as long as we are limiting the supply of Russian oil to the West, that’s going to create an artificial shortage and when demand exceeds supply, the markets adjust by raising the price,” Quirmbach says.

He agrees with a statement issued by an AAA spokesman this week which said, “There are very few things that a president can do to help lower the cost of oil, and this administration tried to do pretty much everything that it can.”

In a Radio Iowa interview last week, Iowa Senator Chuck Grassley, a Republican, placed the blame of high gas prices on the Democrat in the White House, saying: “I think Congress has set a pretty good policy for energy. This president has screwed it up.”

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