This short Cato Institute commentary provides a useful perspective on the history of US gasoline prices. E.g., gasoline would have to cost $5.17 per gallon today to have the same impact on the consumer’s pocketbook as 29 cents in 1955 [adjusting for inflation and changes in disposable per capita income.
To be completely accurate, we also need to adjust for the improvements in energy efficiency. Very roughly, a 1955 vehicle burned at least 70% more fuel than today - so $7.40/gal today would be apples-apples equivalent to the $0.29/gal 1955 price.
…There are probably three reasons that gasoline prices appear so high to us today. First, many don’t fully appreciate the long run effect that inflation has on prices. Second, many don’t appreciate how much our incomes have increased relative to prices. Finally, we still remember 1998 very well, the year in which we encountered the lowest gasoline prices since 1949. Gasoline in 1998 sold for $1.03 per gallon, the equivalent of $1.21 in today’s currency. Adjusting for growth in per capita income yields a price of $1.35 per gallon in today’s terms. Today’s price is more than double that and people resent the increase over the last several years, in part, because they think that 1998 prices were normal. But they were not.
Now let’s put the recent price increase in terms of real outlays. The average household is spending $136 more on gasoline every month than it was in 1998 and $114 per month more than it were spending in 2002. But, believe it or not, real (inflation-adjusted) disposable income per household has increased even faster than have pump prices; by $800 a month since 1998 and $279 a month since 2002.
Accordingly, Americans are still, on average, economically ahead of the game.
No one likes high gasoline prices. But they are not as bad as most people think. Keep that in mind the next time some politician or media populist starts handing out the pitchforks.
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