What People Are Getting Wrong This Week: “high” Gas Prices
Have you experienced gas pump shock recently? The national average price for a gallon of gasoline is $3.78 as of October 4, 2023, and in June it reached $5.02 per gallon, so it’s hard not to think, “Jeez, that’s a lot ?” when filling the tank. But despite the appearances fueled by self-serving election-year political rhetoric , in practice gasoline is cheaper than it was in most people’s “good old days” and only marginally more expensive than it was during better times in U.S. history. buy gasoline.
“Gas prices are too high (and it’s the other guy’s fault)” is a familiar refrain in politics, an easy throwaway line, but the actual numbers tell a different story.
Gas price versus inflation
In dollar terms, gas prices are going to be a disaster over time. Just look at this chart (according to the US Energy Information Administration):
Alarming, as Elon Musk might write. But this chart is not adjusted for inflation, and focusing on the nominal price of anything is a game for suckers. Gasoline costs more dollars per gallon than it did in 1978, when the average cost was less than a dollar per gallon, but each of those dollars has less value in 2023 due to inflation. Once the gas schedule is adjusted for inflation, it will become much more reassuring:
There are peaks and troughs caused by a variety of factors, and the interaction between oil price fluctuations and the inflation rate is itself a can of worms that is well above my pay grade, but in general, the inflation-adjusted charts don’t do the trick. I am not pointing out the rapid rise in gasoline prices.
However, it is growing, especially if you look at the 1990s. Gas started the decade at $1.12 per gallon (unadjusted) in 1990 and ended at $1.12 per gallon in 1999. This decade of stability represents the best gas-buying scenario since the invention of the automobile. Gas is a little more expensive now than it was then, but not by much.
Gasoline vs fuel efficiency, or why the 1970s were the worst time to drive
Back in 1978, the average fuel economy of cars in the United States was about 19 mpg, and the average price of a gallon of gasoline in 2023 dollars was $4.37. So 10 gallons of gas would cost $43 and travel 190 miles, or $0.23 per mile. In October 2023, the average mpg for all vehicles (including SUVs) is about 25 mpg, and gas costs $3.78. So you’re paying about $37 for 250 miles of driving, or about $0.15 per mile.
Back in 1992, when the price was $2 per gallon (adjusted for inflation), the average fuel economy for a passenger car was about 19 mpg, at $20 for 190 miles you paid $0.11 per mile. It will reach 26 mpg in 2023. So $0.15 per gallon. That’s $0.4 per mile more expensive than the best driving time in recent history, but even that’s not all, even if we ignore the fact that many people choose to drive less fuel-efficient cars. in 2023, the math still shows that burning gas costs about the same as it did then.
Gasoline prices and real wages
If you start comparing inflation-adjusted wages for workers in 2023 and wages for workers in 1992, the difference in gas prices virtually disappears.
In 1992, the golden age of gasoline prices, the average U.S. worker earned about $56,684 a year adjusted for inflation, or $27.16. per hour, so it took about five minutes of work at $0.45 per minute to buy a gallon of gas that would last 19 miles. That’s about 16 seconds of work for every mile traveled.
In 2023, the average salary in the United States will be $59,428, or $28.34 per hour, or $0.47 per minute. So, it takes about 8 minutes of work to buy a gallon of gas that will take you 26 miles. That’s about 18 seconds of work per mile. While it’s true that the average worker gains two extra seconds per mile, if that’s important to you, you can drive a hybrid—an option not available in the 1990s.