Recently I came across this assertion in a comment box on one of my favorite websites: "The cost to fuel your car has never been higher as a percentage of disposable income."
Really? I know gasoline prices are high, but you just can't make that assertion without looking at incomes and fuel economy, too. I decided to check the data.
I was able to put together 50 years of pretty consistent data for the key variables, with only a little stitching together to make the starting points and end points fit. The series I used were:
• Nominal wage in dollars per hour for production and nonsupervisory workers.
• Average fuel economy of cars on the road, old and new, based on a series from the Department of Transportation for 1980 to 2012 and estimates from various sources to fill in the earlier years.
• Average gasoline prices from the Bureau of Labor Statistics and Department of Energy.
For years before 1964, data is harder to come by. Instead of trying to put together a complete series, I decided to go with spot estimates for three iconic cars of yore: A 1919 Model T (About 17 MPG), a 1935 Ford V-8 (about 15 MPG), and a larger 1950 Ford V-8, about 14 MPG.
To calculate the miles that you could drive per hour worked (MPHW), just divide your wage by the price you pay for gasoline and multiply by your car's fuel efficiency in miles per gallon.
Back in the good old days, an hour's wages wouldn't get you very far. Your Model T only got about 17 miles per gallon from its 20 h.p., 2.9 liter engine. If you had a good job (making Model T's, for example) you could expect to earn about 50 cents an hour, which would buy you just two gallons of gasoline. That comes out to just 34 MPHW.
By 1935, with the Depression in full swing, wages were still pretty low and your 1935 Ford V-8 gave you even worse fuel economy than the Model T, but at least gasoline was cheaper. MPHW edged up to about 50.
After WWII, wages started to climb, pushing MPHW over 100 by 1950. For the first time, you could actually earn money faster than you could burn through it on the highway. In the 1980s, things started to get better still. Oil prices dropped from the peaks they reached during the crises of the 1970s, better technology pushed the fuel economy of the average car over 20 MPG, and wages more than kept up with inflation. Miles per hour worked peaked at 271 in 1999, a year when gasoline cost a modest $1.13 per gallon, the average car on the road got 22.9 MPG, and the average production worker earned $13.49 per hour.
Since then, gasoline prices have risen sharply, fuel economy of the average vehicle has gone up only slowly, and wages have not risen as fast as gasoline prices. As a result, the average MPHW has fallen by about 35 percent to about where it was in 1980. Here's the full chart:
Does it look discouraging? Don't lose heart. The good news is that each year there are more fuel-efficient cars on the market to help you beat the high price of gasoline. For example, the popular Toyota Prius, rated at 50 MPG (and many owners will tell you they do better than that) yields 285 MPHW at the average wage for production workers, beating even the 1999 average. If you don't want to pay the extra sticker price of a hybrid, the peppy little Ford Fiesta I drive gets 42 miles per gallon from a conventional gasoline engine-at least if you can call one-liter displacement, three cylinders and a turbocharger "conventional."
So sharpen your pencil, calculate the MPHW for your current car and job, and for your favorite cars of years past, and fill the numbers in on the chart. Enjoy!
By. Ed Dolan of Economonitor
Edwin G. Dolan holds a Ph.D. in economics from Yale University. Early in his career, he was a member of the economics faculty at Dartmouth… More
Comments
Today, minimum wage is near 8 dollars an hour, and gas is about 4 dollars a gallon. A minimum wage worker can purchase 2 gallons of fuel.
I think the real cost of fuel is increasing, and that will represent a real decrease in the standard of living. The work (in terms of physics) that gasoline is enormous and wide ranging - from farming, to transporting food and other materials, to fabricating structures, to mining and tunneling - the list goes on and one.
http://www.themonkeytrap.us/twenty-important-concepts-i-wasnt-taught-in-business-school-part-i
Your researched wage curve should reflect the dimunation of disposable income imposed by aggregate (local, state, federal) taxes over the same period. One metric that is readily available, is known as "Tax Freedom Day" (with data going back to the year 1900), could be implemented to moderate your field data.
The wage data is fundementally distorted by the US dollar's role as reserve currency (since it is non-backed). The ability to offshore price inflation through bond and currency manipulation has artifically boosted purchasing power of the $USD (and other NATO powers) to the detriment of the outsiders.
A tax-corrected, median "world wage", divided by the gasoline spot futures price, would tame these inconsistencies.
Compare that to the cost of a Wind Turbine in American Blood.......
Compare that to the cost of Locally grown Algae Bio-Diesel and refinement in American Blood...
Compare that to the cost of Yellowstone National Park Geo-thermal energy capacity in American Blood...
I like Oil....but I love energy CHOICE better..!
One way we have found to reduce our fuel costs is an electric vehicle. Our EV is 1/3 the cost to drive of a Prius. 200 miles on $5 of electricity. That is electricity that is nearly 100% American made and now thanks to roof top solar it is electricity I can produce.
Imagine that! A car that runs on sunshine!
This recent trend is undoubtedly related to expansion of the US Fiat Currency Supply, i.e., State-created Price Inflation.
I'll bet this graph/chart corresponds to the expansion of the US Money Supply in the mid-1990s that began to finance the US military aggression/wars in Iraq and Afghanistan without raising taxes.