Gas prices are up, obviously, the highest in seven years, in nominal terms (not inflation adjusted). There doesn’t seem to be as much of a public reaction, in part because it’s really not all that high (around $3.46 average in December). The average fuel economy of cars has been going up too, so the hit to the pocketbook is not that significant. Still, one all-too often hears about how cheap it was back in the good old days. How many comments have there been over the years about memories of 29 cent gas, as folks who were around back then fondly reminisced about those low gas prices.
Obviously they forgot about inflation, as well as fuel economy. Twenty gallons of 30 cent gas in this ’63 Pontiac cost $6.00 then, but that’s $50 in 2020 dollars. And its 13 mpg mileage means that it was costing close to 20 cents per mile (2020 dollars) just in gas. A 2020 car getting 30 mpg would cost half that per mile, even at current high prices.
And then there’s the fact that this family man likely had more mouths to feed, other than the venturis on his 389 V8.
Here’s the full chart of gas prices, nominal and inflation adjusted (to 2020 dollars, which I’m going to use for the rest of my commentary, unless otherwise noted). If you want to see the year-by-year prices, both nominal and adjusted, as well as more commentary, here’s where these are from. It does end a bit early, and doesn’t show the run up since 2020.
As we can see, gas started out quite expensive, at well over $4/gal. It came down in the 1920s, as the large oil companies saw improved efficiencies through scale and improved technology. It dropped again during the Depression in nominal terms, but actually increased in adjusted terms because of the deflation at the time.
Between 1946 and 1962, it was in a fairly narrow range between $2.60 and $2.90 per gallon. Then there was a downward trend through 1972, in which year it bottomed (for the time being) at $2.22.
Before we go further, a couple of things to consider. Actual purchasing power (income in relation to inflation) was of course considerably lower in the 1940s and 1950s, when it began to increase steadily with improved productivity and other factors. Gasoline was much higher proportion in income back then, which explains the popularity of six cylinder cars and the rapidly swelling influx of imports.
Ever bigger cars with bigger engines, automatics and power accessories grew in popularity the same time the adjusted price of gas was declining (1962 – 1972) and peaked right at the time of that historic low (up to then) in 1972.
Another factor to consider is the annual distance driven per year, which increased steadily throughout this whole period as the move to suburbs was on, big time.
So there were various factors that played into the impact on wallets from the price of gas. Folks drove less back in the early 50s, but the cost of gas was not insignificant in relation to income. It was a real factor for drivers of modest and lower middle-incomes.
The impact of the two energy crises are of course obvious on this chart, and the $3.81 price in 1981 was a new high-water mark since about 1920. But it came down again quite rapidly, bottoming out in 1998 at $1.61, the all-time low based on full-year national averages.
There were of course fluctuations both within those years as well as regionally, so undoubtedly folks will remember prices higher and lower than is shown here.
That brings me to my question as to whether I once bought the cheapest gas ever (not counting loss-leader gas wars). Over the Dec. 2001 – Jan. 2002 holidays, we went to California, where gas prices are usually higher than in Oregon, and typically the highest in the country due to very high taxes. But they were quite low already in the Bay Area where we stayed first. The kids wanted to go to Disneyland, and in Anaheim, I started seeing sign for 99 cent gas. When I saw one for 98 cents, I decided to fill up and I made a point of telling the kids: You will never see gas this cheap again. (Those were nominal numbers; that adjusts to $1.47 in 2020 dollars)
Someone in the comments recently questioned my memory of that, so I found this chart of monthly gas prices for the Southern California region: $1.02 in December of 2001. I don’t remember why it was so cheap; US oil prices did hit a temporary low of $30.46 (2020 dollars) in November of 2001, but that was still almost 50% higher than the then all-time low of $20.44 in December of 1998. There must have been an excess in California refineries at the time; it was not a local “price war”.
It appears I may have been wrong in what I told my kids: gas dropped briefly below one dollar in a few locations in the country in April of 2020, at the height of pandemic lock downs. Oil plunged to $22.06 in March of that year, but it was a short-lived phenomena, and both oil and gas prices rose quickly from that point forward.
Maybe I wasn’t actually wrong, as they never went that low out here on the West Coast, so we never did see them below a dollar here.
It is fascinating to see how gas prices have tended to revert to the $2.86 mean for the overall period (1918-2020), despite significant fluctuations and increases in taxes, at least in some states.