I happened upon this picture I took back in 1999 the other day. So almost exactly 9 years ago, a gallon of regular could be had for about 85 cents in Colorado. Admittedly, even back in 1999 that was cheap, which is the reason I took this picture in the first place. In California, a gallon of regular was around $1.15 at that time. I just filled my tank today, and I paid $3.39 a gallon for regular (only the Porsche gets Premium). This translates to an average price increase of about 13% per year for the last nine years. However, prices didn’t increase gradually – we saw huge swings in short periods of time. For example, last week I paid 6% or 20 cents less a gallon than today. Such price volatility has become a staple in today’s energy market. See the chart below for how prices developed since 1996.
Archive for February 2008
…is a new book by Dan Ariely, a behavioral economist at MIT. The New York Times has an interesting article on his book and its main thesis, that it is more often than not irrational to keep all our options open. Ariely advocates eliminating some of those options as they often consume an inordinate amount of effort and transactions cost. He illustrates his argument with a simple game where the reader is asked to look for money behind three doors on the screen. After you open a door by clicking on it, each subsequent click earns some money, with the sum varying each time. If you don’t click a door it shrinks each time you click on another door, and the neglected door eventually disappears. Your quest is to get as much money as possible, of course. As the game shows, if you keep your options open by making sure the doors don’t disappear, you earn less money than if you keep clicking on the same door all the time. Some more examples…
“…You don’t even know how a camera’s burst-mode flash works, but you persuade yourself to pay for the extra feature just in case. You no longer have anything in common with someone who keeps calling you, but you hate to just zap the relationship…Your child is exhausted from after-school soccer, ballet and Chinese lessons, but you won’t let her drop the piano lessons. They could come in handy! And who knows? Maybe they will…”