Gas Is Actually a Bargain at $3.56

by: Mark J. Perry

From an anonymous comment on this CD post about gas prices as a percentage of income:

"You should further adjust the data for increased fuel efficiency per mile travelled and average mile driven per auto. 1000 gallons of use in 2008 moves an auto at least 50% further than in 1980."

In response, the chart above shows the average annual miles per gallon for passenger cars, from 1949 to 2005 (EIA data available here). From a low of 13.4 m.p.g. in 1973, fuel efficiency increased by 71% to 22.9 m.p.g in 2005 (most recent year available), and by 43% since 1980 (14 m.p.g.).

Bottom Line:
Adjusting for both increased fuel efficiency and the significant increases in income since 1980, gas today is a bargain, even at $3.56 per gallon (price I paid today in Michigan).

Gas Prices Could Be Worse - A LOT Worse

About 2.5X worse to be exact, in the Netherlands. See retail gas prices above in selected European countries from late April 2008, data available here from the EIA.

Retail gas prices in other European countries: