So gasoline prices are back to $3.00 a gallon all around the country, and without a hurricane or a ruptured pipeline to blame.
From Florida to the Carolinas to California to Rhode Island, the Great American Consumer is paying three bucks-plus for not-even-premium unleaded gasoline—and we’re still not in the summer peak driving season yet.
But it’s not just what you’re putting in your car that’s going up, as consumers already know: it’s the price of the car and the price of the car’s own tires…and now it’s the asphalt underneath those tires, too.
This is a price list of performance-grade asphalt, Free-On-Board at New Haven, Connecticut:
Price/Ton
4/24/2006 $305.00
4/17/2006 $302.50
4/10/2006 $297.50
4/3/2006 $280.00
3/28/2006 $280.00
3/20/2006 $280.00
3/13/2006 $250.00
3/6/2006 $250.00
By my rudimentary calculations, that’s a 20% increase in the last two months.
I suppose it’s time to eliminate asphalt from the adjusted inflation statistic:
“Ex-Food, Energy, Tires, Houses, Insurance, Rent, Healthcare, Google Ad-Words, United Healthcare CEOs, and Asphalt.”
Jeff Matthews
I Am Not Making This Up
© 2005 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.
4 replies on “Time to Eliminate Asphalt From the Price Index”
You can monitor gas price inflation daily with this site:
USA National Gas Temperature Map
I am no chemical engineer, but I am pretty sure that a good chunk of materials that go into making asphalt is oil based/related, so no surprise that asphalt prices would move up with with oil (and other commodities).
As far as $3 gas is concerned, gas/heating oil futures anticipate peak demand season (driving/winter cold snaps), so they tend to be at their highest right before. If they follow their historical seasonal patterns, they should start to moderate fairly soon.
Of course, none of this changes the fact that we have definitely entered an inflationary phase the likes we have not seen since the 70s.
dkman: yes, asphalt’s primary ingredient is the heavy sludge left over from crude oil after you have distilled away to good stuff (eg gasoline and jet fuel).
However, Asphalt is:
(1) expensive to store
(2) low value,
(3) only consumed when the weather is warm. (try smoothing asphalt over a road during a blizzard…)
Therefore asphalt prices typically fall going into winter and rise in the spring. I know of one case in the 80s where a West Texas refinery was *giving* asphalt to the highway department for free because they had nowhere left to store the gunk.
So the interesting comparison is to the year-on-year monthly prices, which are up even more dramatically than Jeff’s post.
There seems to be a hidden agenda in the FED, “keep interest rates as low as we can get away with”.
“ex- indexes” as valid inflation measure tools are indefensible, now that over 3 years have passed without energy prices converging.
We face a permanent change in relative prices, that must be recognized as such.