Gas Price Economics

image I received an email earlier to day trying to promote some sort of a boycott of Exxon/Mobile Mobil gasoline stations in an effort to force them to lower their gas prices. Recognizing that there are few around my neck of the woods, I didn’t pay much attention to the email. Plus, I pretty much disregard those kinds of efforts anyway.

A follow up email attempted to make the point that we aren’t paying that much more for gasoline considering a significant increase in fuel efficiency over the last 20 – 30 years. The examples cited were anecdotal and encouraged me to do a little research on my own.

I was surprised to see that the increase in fuel economy is a lot less than one might have expected over the last 30 years. According to the National Highway Traffic Safety Administration (NHTSA) the average gas mileage for new vehicles sold in the United States has gone from 23.1 miles per gallon (mpg) in 1980 to 26.7 mpg in 2007. This represents a paltry increase of 15% over the 27 year period. Even if you limit yourself to domestic passenger cars the increase is from 22.6 mpg in 1980 to 31.3 mpg in 2007.

imageEven more interesting to me is the fact that we have benefited from a relatively low cost of gasoline for an extended period of time. (see here) Adjusting for inflation we see a steady decline in the cost of gasoline dating all the way back to the 1920s. The only exception is the late 70s, early 80s and the last 5 years. Prices are at their upper limit even with inflation considered. When considering only yearly averages, the highest cost occurred during 1981 at $3.17 (adjusted to 2008 dollars). Through March of 2008, this year’s annual average has been $3.08.

Now back to the original point, on average the cost (in 2008 valuation) per mile was 12.8 cents in 1981 (when gas averaged $3.17 per gallon in 2008 dollars and the average fuel economy was 24.6 miles per gallon) . The average cost per mile, currently, is 13.6 cents (with a current national average of $3.63 per gallon and average fuel economy of 26.7 mpg). In the end, while it seems that we are paying a ghastly amount at the pump we aren’t that far above the historical high, nevertheless we are, in fact, paying more than ever.

4 thoughts on “Gas Price Economics

  1. The biggest thing that upsets me about those emails is that people thinks that it will really do something. That’s like telling someone that voting days are Monday and Tuesday and we are going to show them by not voting on Monday but on Tuesday. It’s absurd.

    Although, on average we are paying slightly more per mile, it definitely doesn’t mean I feel happy about paying $45 to fill my little tank, especially when I was paying around $25 just a couple years ago.

  2. I don’t like it one bit either. Especially since I wasn’t buying gas back at the last peak (1980s). The only thing I can compare it to is the last 15 years and I am paying whole heck of a lot more than I was 5 – 10 years ago.

  3. Nit: “Mobil” does not have an ‘e’.

    Haven’t been to an Exxon station since before the Valdez. It wasn’t the spill, which was bad. It was the half assed clean up. Did they think i’d forget? I’m not brand loyal, but i can sure be brand disloyal. Companies should remember that public relations counts for something.

    Accidently went to a Mobil station yesterday. First time in over a decade. Paid a dime a gallon more than usual, too. Feh.

    In any case, it’s impossible for me to boycott a company that i already avoid.

    I don’t drink coffee, so i can’t opt for shade grown. Can i get “shade grown” Mt. Dew?

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