Record High Gas Prices? We're 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.

Comments

[fourwinds:]

Could you add a graph that shows gas price relative to middle class disposable income? My understanding is that although the USA's total wealth has increased significantly over the time period you show, most of it has concentrated in the wealthy, while lower and middle class incomes have been largely stagnant. I'd like to know how the gas price run-up affects Joe Six-Pack and Susie Homemaker.

2008 Jun 30 07:35 AM

[pockyclips ...:]

They keep moving the goal post back to make us feel better.
I'd guess we will reach this benchmark around October. I concur with fourwinds, these price rises will hit hardest on the working class, not so much for the investment class.

2008 Jun 30 08:39 AM

[john s. gordon:]

you should use median household incomes instead of average, the millionaires skew the average.
> jack

2008 Jun 30 08:51 AM

[redbaron:]

One way to avoid being concerned about high gas prices, is to buy into some of the oil companies stocks. I did so several years ago, and I see it different now, than those that are complaining. We here in the US are still paying less than those in Europe, and many other places in the world. We complain about gov't subsidies in China and India, while subsidizing both ethanol and oil/gas companies ourselves in this country. And all the while, we continue to use cheaper gas than many others, and ignore the growth in global energy demands from other countries.

2008 Jun 30 09:02 AM

[Paul Killinger:]

Great post, Mark.

Of course, higher gas prices will have a disproportionate impact on "working" Americans. So do higher food prices.

I used to hear such wonderful speeches from the Liberals in Congress about how they looked out for the "little guy." Obviously, now they're looking out for the big money from their Green lobby friends, instead.

The AFL just endorsed their new, "Hope they can believe in," for President. Indeed, his was the ONLY NAME on the ballot. At the very same time the D's in Congress are selling them out for higher and higher gas prices... Amazing!!!

2008 Jun 30 10:05 AM

[Paul Killinger:]

But don't worry, the "Hopers" have big plans in store for the investment class, too. Like their already announced DOUBLING of capital gains taxes, with much more to come down the road.

And they'll take care of the little guys, as well. They'll be WORKING FOR THEM when they take over the industries that failed due to their energy

2008 Jun 30 10:18 AM

[Paul Killinger:]

...failed energy policies.

2008 Jun 30 10:19 AM

[Globe199:]

Well, the numbers are outdated. It's now $4.09/gal. So the cost for 1000 gallons as a percent of PCI is 11.05%. Furthermore, like john s gordon said, PCI is not a good indicator because of the outliers.

The point of this article is going to be moot in the not-too-distant future.

2008 Jun 30 10:24 AM

[Peter Sterling:]

Poll: 74 percent support offshore oil drilling in U.S.

Zogby International
11:42 a.m., Thursday, June 26, 2008

Three in four likely voters – 74 percent – support offshore drilling for oil in U.S. coastal waters and more than half (59 percent) also favor drilling for oil in the Alaska National Wildlife Refuge, a new Zogby International telephone poll shows.

SEE:

www.strategicnine.com/...

2008 Jun 30 01:40 PM

[Peter Sterling:]

Poll: 74 percent support offshore oil drilling in U.S.

Zogby International
11:42 a.m., Thursday, June 26, 2008

Three in four likely voters – 74 percent – support offshore drilling for oil in U.S. coastal waters and more than half (59 percent) also favor drilling for oil in the Alaska National Wildlife Refuge, a new Zogby International telephone poll shows.

SEE:

www.strategicnine.com/...

2008 Jun 30 01:40 PM

[srs:]

It amazes me when I hear people say oil prices are going to come down. We are at or near out peak, there is no where for prices to go but up.

2008 Jun 30 05:29 PM