Sunday, June 29, 2008

Record High Gas Prices? We're Still Not Even Close

Despite all of the reports about record-high gas and oil prices, we're still nowhere close to record high gas prices adjusted for the growth in per-capita, disposable income.

The chart above shows the cost of 1,000 gallons of gasoline, as a percent of per-capita disposable income in every month from January 1980 to May 2008. During most of 1980 and 1981, it took between 13.50% and 15% of per-capita disposable income ($8,5000 to $10,000 in that period) to purchase 1,000 gallons of gasoline ($1.25 to $1.40 retail price per gallon in that period), which was far greater than the 10.26% that it takes of today's per-capita disposable income of about $37,000 to purchase 1,000 gallons of gas at the May average of $3.76 per gallon.

For gas to reach a record high as a percent of per-capita disposable income, it would have to sell today for about $5.50 per gallon to reach 14.90% of per-capita disposable income, like it did in March of 1981, when gas sold for $1.42 per gallon, and per-capita disposable income was only $9,500.

15 Comments:

At 6/29/2008 8:16 PM, Anonymous sam said...

professor,that helps put it into persective ,but i don,t think anyone wants us to get there.is it good public policy to allow nonproducers/nonrefiners to set oil/gas prices for an essential commodity that has no substitute?below is excerpt from ed wallaces article http://www.star-telegram.com/ed_wallace/story/659081.html Professor Greenberger warned about our "New American Economy" far better than I could:

"Should we have an economy that’s based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive? We are rewarding people for sitting at their computers and punching in bets. That’s not the way our economy is going to be built, and India and China, with their focus on science and industry and building real businesses, are going to eat our lunch, unless the American public wakes up and puts an end to an economy that praises and makes heroes out of speculators."

Greenberger’s statement explains why Detroit and other American manufacturers suffer while Wall Street speculators make a fortune — and your rapidly shrinking checkbook pays for it, every time you buy food, fuel or feed.

All because there is no shortage of these goods, you’re just being told there is because it’s more profitable – for a few – that way.

© 2008 Ed Wallace
hope everyone will take look at whole article and comment.

 
At 6/29/2008 10:04 PM, Blogger (Q) said...

Good chart. It would be interesting to see gasoline costs as percentage of DPI across the different income groups. (Do you take requests? Kidding.)

In April, the EIA put out a paper on gasoline costs, fuel efficiency, car ownership, etc. which is worth a read.

 
At 6/30/2008 6:34 AM, Anonymous Anonymous said...

I don't think it is a particularly meaningful chart. Median not mean disposable income should be used. And the chart should reflect distance travelled as overall fuel economy in the passenger fleet is higher today. Perhaps the blog host can chart the data from Beth Ann Bovino at Standard & Poors who stated on March 11, 2008 that:

In 1980, the average American had to work 105 minutes to buy enough gas to drive the average car 100 miles, according to Beth Ann Bovino, a senior economist at Standard and Poor's. Now, the average American needs to work only 53 minutes, thanks to better fuel efficiency and higher wages.

I'm not certain that Bovino means mean or median when she refers to the average American.

Of course, with the pump price increases since March, the number of minutes worked to drive 100 miles has increased.

 
At 6/30/2008 7:11 AM, Blogger RightMichigan.com said...

Oh. Great. Well that's... not entirely encouraging.

--Nick
www.RightMichigan.com

 
At 6/30/2008 7:39 AM, Anonymous Anonymous said...

Professor: Your data analysis may be correct, albeit, other costs have risaen at double digits including health care and what this does not account for is individual needs: medical, education, energy (home and business). These numbers are staggering because they represent a percentage of change that does nto reflect social needs and the lack of infrastructure developmental needs in the US due to a failed macro-economic policy and poor fisca;/monetary management that has affected the dollar.

This does not reflect on the tens of trillions of dollars in real debt in this country in all areas: public and private...

 
At 6/30/2008 7:56 AM, Anonymous Anonymous said...

A nitpick with the chart. The May DPI figure of $37000 is overstated due to the one-off effect of the fiscal stimulus cheques in the BEA NIPA accounts. Correcting for the one-off effect, gasoline would have to sell for ~$5.20/gallon to reach the March 1981 highs.

 
At 6/30/2008 8:56 AM, Blogger rufus said...

Isn't that interesting. Oil is up almost 40% from it's all-time highs, adjusted for inflation; but, gasoline would have to climb another 30%, or so, to reach parity, disposable income-wise, with the past high.

I think this deserves further research. I try not to get "surprised" too often; but, this, quite frankly, Surprises me.

 
At 6/30/2008 9:01 AM, Anonymous volomike said...

Glad I'm building an HHO generator. This weekend we got up to 8mpg more before our flimsy bubbler bust open from all the engine vacuum, so it's back to the workbench. However eventually we'll get it.

 
At 6/30/2008 3:13 PM, Anonymous coyote said...

One other note - the average Vehicle mpg has also risen over the last 20 years. You can also do this analysis as "% of income required to drive 15,000 miles a year" and the result is even more in the direction you indicate

 
At 6/30/2008 4:59 PM, Blogger juandos said...

"Glad I'm building an HHO generator. This weekend we got up to 8mpg more before our flimsy bubbler bust open from all the engine vacuum, so it's back to the workbench"...

Is this just a tinkering past time or are you seriously thinking this something worth pursuing volomike?

Do you think there is a possiblity that the idea of replacing gasoline with water might be a SCAM?

If you are still serious, let me introduce you to my very good friend: the first law of thermodynamics...

 
At 6/30/2008 6:59 PM, Anonymous Anonymous said...

Good job on the mpg issue, coyote.

Can you deal with the median income issue?

 
At 7/01/2008 6:53 AM, Blogger robert_m_sykes said...

Go to http://www.coyoteblog.com/coyote_blog/ for a correction for average gas mileage. I bet our current gas price would be even cheaper if the graph were extended back to 1960. The really important point, however, is that our public debates on policy are utterly delusional. How can this country survive with a delusional political class?

 
At 7/01/2008 8:55 AM, Anonymous Anonymous said...

Juandos:

Quote from the link you quoted:

"Unfortunately, the first law of thermodynamics states quite clearly that the energy generated by recombining the hydrogen and oxygen through combustion can only ever be equal to the amount of energy it took to separate them. "

Recombining is not what is attempted. Combustion is what is attempted.

The combustion process is not a Carnot cycle.

Wake up man. You look like a speepy Greyhound bus driver.

 
At 7/01/2008 8:58 AM, Anonymous Anonymous said...

Hey, can you correct the graphs for purchasing power?

Bazed on purchasing power you can affors to purchase just a fraction of the gas you could 20 years ago.

True with everything.

Goodnight and good luck...

 
At 7/01/2008 1:40 PM, Blogger juandos said...

"Combustion is what is attempted"...

LOL!...

Nice try but its time for you to pick up your high school physics book and take another look at it...

 

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