Thursday, May 24, 2007

Is Gas At An All-Time High? Not Even Close

According to the Energy Information Admininstration (EIA), the highest average monthly gas price in the early 1980s was $1.417 per gallon in March of 1981, which in today's dollars is $3.22 per gallon, which also according to the EIA is the average retail cost of gas today.

However, gas prices as a percent of income are still way below the early 1980s. In both 1980 and 1981, 1000 gallons of gas at the average price cost 14.1% of per-capita disposable personal income in those years. Gas prices averaged $1.245 and $1.38 in 1980 and 1981 respectively, and per-capita income was $8,822 and $9,765 in those years (see chart above, click to enlarge; source for Personal Income is Bureau of Economic Analysis, Table 2).

Gas is now selling for an average of $3.22 and per-capita disposable personal income in March was about $33,000, so that 1000 gallons of gas now costs 9.76% of per-capita personal disposable income (see chart above, click to enlarge).

Bottom Line: Gas is still much cheaper today as a percent of income compared to 1980 or 1981. To be as expensive as gas was in 1980-1981 gas (as a percent of income), prices today would have to get all the way up to $4.62 per gallon.

Reason: Gas prices have increased about 2.5X since 1980-81, but per-capita personal disposable income has increased by about 3.5X during that same period.

13 Comments:

At 5/24/2007 2:39 PM, Blogger AfterHim Media said...

Nice graph...where did the stats come from?

 
At 5/24/2007 2:51 PM, Anonymous Anonymous said...

Shouldn't you be reporting in nominal dollars? Aren't you also hiding the actual time spent earning a disposable dollar under the generic "income".

 
At 5/24/2007 2:57 PM, Anonymous Anonymous said...

How many gallons are used per household though? My guess is much more is used in 2000 than in 1950. Children have cars, Wives have cars. Plus this is avoiding the fact that gas has doubled in approx 5 years. So who really cares if in 1945 gas was expensive. Hell sugar was expensive since we had rationing during WWII.

I'm not sure what this graph is trying to show but when 10s of billions of dollars are made in profit quarterly on something so vital to the economy as oil & gas. Regulation should be a viable option. Unfortunately when the congress & president are in the pocket (book) of big business, the less than wealthy get robbed.

 
At 5/24/2007 3:28 PM, Blogger ultralame said...

Why compare to % of disposable income? How about as a % of non-discretionary expenses? Now that we have so many more 2-earner families, we are going to have more disposable income.

If you want to compare the COST of gasoline, you need to compare it to how much you spend on necessities, not how much extra you have lying around.

 
At 5/24/2007 3:44 PM, Blogger Mark J. Perry said...

1. Gas prices are from the EIA, I have a link in the first line. The source for Personal Income (BEA) and a link have been added to the second paragraph.

2. Since both gas prices and personal income are in nominal terms for the same year, no adjustment should be necearry for inflation.

 
At 5/24/2007 5:50 PM, Anonymous Anonymous said...

does this adjust for federal subsidies?

 
At 5/24/2007 9:43 PM, Blogger juandos said...

"I'm not sure what this graph is trying to show but when 10s of billions of dollars are made in profit quarterly on something so vital to the economy as oil & gas"...

So did you ask your Senator and or your House Representative both in the national Congress and your own state to cut the gas tax?

The taxes extorted per gallon of gasoline sold is considerably more than what profit the oil/refining companies make selling it...

BTW ask yourself a question, "what part in the retreival, refining, and distribution of crude oil products does those who do the taxing contribute in bringing these products to you?"

Your next question: "does this adjust for federal subsidies?"

Define, "federal subsidies"...

Does that mean the government is just extorting less taxes comparable to some time in the past or does it mean that the government actually sends the oil companies money?

Who is "gouging" Whom at the Pumps?

 
At 5/24/2007 11:24 PM, Anonymous Schloopy said...

Another source I would recommend on all of this is The Oil Drum. They've had some great posts of late on the role of Saudi Arabia's decline in production on supply availability and its effect on prices, as well as deconstructing some of this silly "gouging" talk.

 
At 5/25/2007 9:48 AM, Anonymous Anonymous said...

Hey Mark,

Testable Hypothesis: A time varying measure of gas price elasticity (in absolute value)should be positively related to your series.


Tony C

 
At 5/25/2007 10:11 AM, Blogger juandos said...

"A time varying measure of gas price elasticity (in absolute value)should be positively related to your series"...

Isn't it already? Its called, "percentage of income"...

 
At 10/09/2007 8:07 PM, Blogger undergroundman said...

Is your income per capita adjusted for inflation?

Also, it may be cheaper as a percentage of "per capita income", but since when was per capita income disposable income? Income inequality has increased dramatically since the 1980s. The fact that a few people have a huge amount of disposable income now does not mean that the majority has more. Real wages have remained stagnant.

 
At 3/11/2008 8:35 AM, Anonymous Anonymous said...

I'm not sure what this graph is trying to show but when 10s of billions of dollars are made in profit quarterly on something so vital to the economy as oil & gas. Regulation should be a viable option. Unfortunately when the congress & president are in the pocket (book) of big business, the less than wealthy get robbed.


So your saying if you were the owner of Exxon Mobil you would lower your price? No you wouldn't. You have a product people want and need and they know that. They are running a business just like many of us do, the only difference is their product is needing by everyone so it drives up demand and in turn drives up the price, eventually the free market corrects its self and the price falls a little, then goes back up etc.. I don't like paying for it as much as the next person but everyone wants to blame the gas companies when all they have to do is look at the amount of tax put on gasoline, and the law that may pass that will make the tax much worse. My opinion is they are doing their job and they are admist a "perfect storm" if only every one was so lucky.

 
At 7/07/2008 10:46 AM, Anonymous Anonymous said...

It seems as though a lot of people are trying to justify their gripe about the cost of gasoline rather than acknowledge the facts. No mater what the cost we are still far cheaper than the european countries.

 

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