Wednesday, March 12, 2008

Tuition vs. Gas Prices

By Andrew Gillen

The price of crude oil is hitting new highs almost daily ($108 per barrel yesterday). This is leading to higher gas prices, about which the news is constantly reporting. Reporters have no problem finding people who are forced to alter their consumption patterns due to the increased cost of filling up the tank. While I don't like higher prices more than anyone else, behavioral changes are a predictable result of increasing prices. Which got me thinking, what else has gone up in price over the years?

The graph below shows the inflation adjusted price of a gallon of unleaded regular gas, and average tuition at 4-year public degree granting institutions from 1976 to the present, indexed to their 1976 price.

Sources: Digest of Education Statistics, College Board, Bureau of Labor Statistics, CCAP Calculations.

As you can see, while the price of gas has gone up and down over the years, the price of college has consistently gone up. Moreover, tuition is more than two and a half times more expensive now than in 1976, while gas is not even one and half times as expensive (and has just recently surpassed its previous high in the early 1980s).

It is also interesting to note that both tuition and gas prices have been increasing at similar rates since 2002. Why the disproportionate news on gas price increases, but not tuition increases?

Perhaps it has something to do with the boiled frog analogy. People also buy gas much more frequently than they pay tuition. Or maybe it's because tuition is expected to increase every year. Whatever the reason, CCAP will be striving to ensure that the situation changes.

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