Saturday, January 14, 2012

Post # 61: Gasoline In 1981 and 2011

According to a recent press release from Ford Motor Company, the price of gasoline, as a percentage of the average American household income is at it's highest level in 30 years.  Per Ford and the Oil Price Information Service, 8.4% of the average family's income is now spent on gasoline – averaging $4,155 annually per household.  The last time gasoline took such a large chunk out of the average family's budget was 1981.

This caused me to wonder about the comparison between the Corporate Average Fuel Economy (CAFE) standards for 1981 and 2011.  It turns out, the 1981 U.S. CAFE standard for passenger vehicles was 22.0 MPG (and something close to 16 MPG for trucks).  The 2011 CAFE standard for passenger vehicles was 30.2 MPG.  That's a President Obama has proposed a combined (autos & trucks) CAFE standard of 35.5 MPG in 2016.  In July of last year, he announced an agreement to increase the combined (auto + light-duty trucks) standard to 54.5 MPG by 2025.

Not everyone, of course, drives a new vehicle.  And the CAFE standards are averages.  So, your mileage may vary.  But I do find it interesting that during a period (1981-2011) in which the automobile CAFE standard increased by 37%, the annual average consumer price index (CPI-U) increased from ~ 91 in 1981 to ~ 225, or ~ 145%.

So during the last thirty years, the overall cost of goods and services we purchase has gone up by 145%, and (equating "share of income" to "share of expenses" - which isn't precisely correct) the share of that 145% increase consumed by our monthly addiction to gasoline has increased by ~ 8%.

During this same period, the inflation-adjusted median U.S. family income has risen from ~ $18,000 (nominal) or $44,000 (CPI/inflation adjusted) in 1981 to ~ $49,000 (2011) last year.  Thats a 172% increase in median family income (non-CPI adjusted).

So, compared to 1981, we're making 172% more money, our cost of living has increased (only) 145%, CAFE mileage standards have increased by 37%, and the share of our cost of living spent on gasoline has increased 8%.

I have to reflect a bit on what all of this means, but I think it means (1) we are better-off, from the household economics standpoint, than we were in 1981, but (2) gasoline price trends are undercutting our economic prosperity despite the ongoing improvement in automobile technology.

Nothing shocking in this, but it's interesting to dig below the press releases to examine the numbers and their context.

Just thinking...


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