I keep hearing that current gasoline prices are not at their all-time peak when adjusted for inflation. Inflation is usually figured by factoring in the prices of many things, like food, fuel, housing, etc. The Consumer Price Index is calculated this way, for example. It has occurred to me that, since the cost of gasoline is a significant part of the cost of living, it might be misleading to adjust the cost of gas by using an index that includes the cost of gas.
Let me try to make this clearer: suppose there were an index of inflation for which the cost of gasoline accounted for 90% of the index’s value. If one used this index to adjust for the cost of gasoline with respect to inflation, it would look like the cost hardly fluctuated at all.
Now, I’m sure that gas doesn’t account for 90% of the CPI (or other indexes), but at the same time the cost of petroleum affects the cost of many things. Petroleum (in different forms) is used for transportation, manufacturing and materials. When the cost of crude oil goes up, the cost of almost everything goes up. So the CPI is correlated to something that also correlates to the price of gas.
So my questions are, how meaningful is it to adjust the cost of gas for inflation using conventional indexes, and is there some way to get a more meaningful adjustment?