Schork: Retail Gasoline v. Superbowl Tickets Since 1966
Retail Gasoline v. Superbowl Tickets…a Fool and his Money
In 1966, wholesale gasoline cost around $0.15 a gallon (nominal) according to data from the BLS. Prices have grown at an annual pace of 6.2% since then, peaking at $3.438 in July 2008. In 2009 prices crashed to $1.78 on the combination of the corrective swing created by the implosion of the 2008 energy bubble, along with the greatest contraction in global economic activity since the Great Depression. Price then bounced back to an average $2.25 last year on the wholesale level and $2.79 on the retail level as the economic recovery picked up steam.
Now, if we adjust the price for the rise in the cost of living, then a 1966 gallon of gasoline should be worth around $1.00 in 2010. It is hard to find retail gasoline prices from the 1960s because the DOE and BLS only provide consumer data since 1976.
However, if we look at the historical relationship between producer and consumer price, we come out to price of around $0.32 a gallon in 1966 or $2.15 in 2010.
As analyzed in today’s issue of The Schork Report, $2.79 at the pump in 2010 seems rather dear, but then again, in 1966 we were putting leaded gasoline in our cars and getting a lot less bang for our buck.
For instance, just before the 1973 Arab oil embargo, passenger car fuel economy was 13.4 miles per gallon. Three oil shocks (1973, 1980 and 2008) later and fuel economy is 22.6 miles per gallon. Furthermore, energy consumption per GDP was 15.40 MBtu/$1 in 1973.
Today, consumption is less than half that, 7.35 MBtu/$1 (as of 2009). As a result, in 1966 we were paying around 4.3 cents on our dollar towards energy, primarily gasoline to fire up our Pontiac GTO, whereas in 2010 we shelled out 3.4 cents of our dollar for our Prius.
Why are we interested in pre-1973 gasoline prices and 1966 in particular, as our reference point? Because that is the year the AFL and NFL merged into one league. At the end of that season, the champion of the newly formed AFC division played the champion of the NFC division in the first Super Bowl. Tickets to that game set you back as much as $10, which is dear when you consider gasoline only cost you $0.32 a gallon.
As such, the first Super Bowl did not even sell out.
This Sunday will mark the 45th Super Bowl. Therefore, let’s compare the inflation at the gasoline pump to the inflation of ticket prices to this weekend’s game.
Last night, we checked out ticket quotes on the aftermarket, i.e., state-sanctioned scalping website, e.g. StubHub.com. A seat to Sunday’s game in Section 421, Row 21, which according to the map of the cowboy’s stadium is in the upper corner end-zone, i.e. the cheap seats, will cost you $2,250. That is a 22,400% increase from 1966.
If you want a “good” seat, say midfield, behind the Steeler’s bench in the Premium Club Section 137, Row 12, you will have to pony up $7,495 per ticket, but that does not include the $15 game day parking fee, seriously.
We don’t know about you, but we think that is a lot of money for the utility of watching an 11 minute halftime show by the Black Eyed Peas and (what is often) a mediocre football game.
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Face value tickets this year probably will run around $1,000, but now that the NFL has whored itself out to professional ticket brokers, a good portion of tickets will sell for a significant multiple to face value. Either way, $1,000 face value or $2,250 for a cheap seat in the aftermarket is absurd. Especially when you consider what a bargain gasoline is today, yes, even at $3.
After all, for the price of admission to the first Super Bowl, you could purchase 31 gallons of gasoline. Today, one Super Bowl ticket (face value) buys you nearly 360 gallons! Absurd indeed, but then again, in 1966 the notion of paying $1.50 for a pint of “spring water” would have been considered absurd.
What’s more, who is to say your typical football fan can actually afford these prices… especially a lot of Steeler (or is that Stiller?) fans in the Mon-Valley.
In January 1967 a production worker earned $2.79 an hour, today they earn $17.80 an hour. In other words, in order for a fan in Green Bay to see his Packers play the Kansas City Chiefs in 1967 he had work 3.6 hours. Today, that fan’s son or daughter has to work 56 hours.
Mind you, we favor open outcry markets, be they the NYMEX or StubHub, because there are no better mechanisms for price discovery. After all, professional sports leagues sold their souls to TV money long ago… hence why important sporting events, whether we are talking about the World Series or the Meineke Car Care Bowl are played long after we put our kids (i.e. the next generation’s potential gate receipt) to bed. Therefore, doing the same at the gate for the Super Bowl was just a natural extension of the league’s gluttony.
Anyway, consider what you are getting for your money. For gasoline, there has been huge investment in the efficiencies of up-and-downstream capacity that has yielded tremendous quality gains in refined petroleum products since the 1960s, e.g. we no longer use leaded gasoline. Dwindling supplies of sweet crude oil has to be sourced (from some rather dodgy places btw) and transported. Then the crude has to be refined. What’s more, different regions of the country require varying degrees of “environmentally friendly” fuels. So not only do you have to import the “right” type of crude oil, but marketers also have to factor in the distribution logistics depending on where the end-product is going to be consumed.
All individuals in this sequence, working on Adam Smith’s principle of “enlightened self-interest,” have to be compensated… along with Uncle Sam and the state governments who will extract their vigs. Finally, the gas station has to be allowed to make a few pennies while trying to compete with the three other stations on the block all selling the same commodity.
On the other hand, unless you think made for TV self-aggrandizing (look-at-me flexing and posturing) — after virtually every play — has somehow improved the game, the quality of football has hardly improved since the days of Unitas, Starr and Namath.
Today’s issue of The Schork Report highlights that while prices have increased to around $1,000 for one game, whereas had they kept pace with inflation, a $10 ticket in 1966 would be worth $67.20 today.
We think paying $1,000, $2,000… etc. for a football game is the height of stupidity, but then again, over the last couple of years we have seen that Americans, from Wall Street to Main Street to Pennsylvania Avenue, are capable of doing lots of stupid things with money.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.