And You Think Today's Gas Prices Are High?

The chart above (click to enlarge) shows the cost of 1,000 gallons of gas as a percent of per-capita disposable income, annually back to 1929, using EIA data for gas prices and BEA data for disposable income and GFD data for population (subscription required).

The retail price of gas was only about 20 cents a gallon from 1929 to 1946, but annual per-capita disposable income in the 1930s was only about about $400-500 (about $6,000 in today's dollars), so that a 1,000 gallons of gas cost as much as almost 49% of per-capita disposable income in 1933, and averaged more than 38% from 1929-1939~!

To reach those levels today, gas would have to sell for between $14 and $17 per gallon!

Bottom Line: When it comes to gas prices, it could be a lot worse. It was a lot worse. A lot, lot worse.

As an exercise, consider your life today, your house, your cars, your appliances, your electronic equipment (Blackberry, iPod, laptop, cell phone, DVD player, etc.), your life expectancy, your income, gas prices today as a percent of your income, and your overall standard of living, and now go back several generations or more, and compare your life and standard of living today to your grandparents, great-grandparents, or whatever generation in your family background was around in the 1920s and 1930s.

I think you'll find that there's no comparison. In most cases, you live like a millionaire compared to your great-grandparents, and in fact you have affordable modern electronic equipment like iPods, cell phones, and laptop computers (which are standard today even for high school students) that even a multi-billionaire couldn't have purchased in the 1930s! And as a percent of your income, gas today is still dirt cheap compared to gas in your grandparents' or great-grandparents' generations.

Comments

[EnoughWealth]

It's even cheaper today if you also take into account the fuel efficiency of modern cars compared to the 70's and 80's or earlier.

eg. A plot of the cost to drive 1,000 miles in a the 'average' car for the period vs. per-capita disposable income.

[800LBGORILLA]

Interesting.

[jjason]

What's with this guy? The "cheap gas" has put many consumers in a bind. Other countries are looking at food shortages. Does he read what is published on other sites by other writers?

Sometimes, Dr. Perry, I think you profit from higher oil and gas prices.

If you want to see lower commodity prices, complain to your Congressman about the "Enron Loophole". Go to:

www.star-telegram.com/...

and learn how we are being cheated.

I don't think gas and oil prices are cheap and I am tired of being cheated by the legislation that Phil Gramm ( another economist who was once a US Senator ) sneaked into an appropriations bill around 1999.

Gramm's legislation allowed Enron to exist as an energy trader and price manipulator. The legislation I am referring to still exists and Congress needs to fix it. Complain to your Congressman.

[User 51292]

Except you should factor in the Trillion dollars we will spend in Iraq, the massive 14 billion in tax breaks and subsidies for the oil and gas industries last year, the air pollution it causes and the harm it will do and is doing with regard to global warming. Oil may be cheap but not all the costs of it are factored into it. Compare that to solar power, no harmful emmissions, no air pollution, no global warming issues, and it's an essentially free source of energy. Level the playing field, tax the carbon load the oil industry is producing and wind, solar and geothermal will come out way ahead by comparison! By the way, cars can and will be powered by the sun in the future, not by oil.... oil's days are numbered.

[CLH]

Oil came from the sun---millions of years of suns energy. The left wing retards beleive that during our short life the sun can give us a meaningful amount of energy. The only thing more idiotic is thinking man can get enough energy from wind power. The only viable power for the future is nuclear. Wake up lefties. Take some science courses. Al Gore wasnt smart enough to take science.

Yes oil is cheap!!!

Where do you come from User boy?

[john s.gordon]

jason - your comments about the gramm giveaway to the manipulators are right on. wasn't wendy gramm a director of enron? nice conflict of interest there.
> jack

[billp37]

"The only thing more idiotic is thinking man can get enough energy from wind power."

Yes, but there is a lot of money to be made selling wind turbines the gullible.

www.prosefights.org/pn...

[mickel98]

Yes well, isn't the general idea that things should be getting better and not worse? Why sit around saying -well, could be worse! Energy really should be free and widely available. It already is abundant nearly free for solar using stirling engines. Look at the 500MW station going up near San Diego. We could have plenty available from Nuclear energy too, Fission now and fusion if we ever get there. Sadly, we have stupidly and stubbornly based our economy on cheap oil and inefficient use of it. Dumbest of all, we buy most of it from badly run countries and now are in competition with other developing countries for it. AND WORST OF ALL, we have no one in Congress or in any influential position who even has an engineering degree. People think engineering is done by elves who show up at night. Anyway, I bought an NGV Honda. I now pay 90 cents a gallon, change my oil every 30K miles, consume CNG pumped right here in OK, and create virtually no pollution. Happily, the rest of you won't do the same because you'd rather argue about politics. Drill here and get off the stuff - move forward, not back. Get more cheap energy. AND GET MORE ENGINEERS IN CONGRESS!!!!!

[ART005]

I think Dr. Perry's point is that the difficulty and trauma of the food/energy costs today come from relatively low costs compared to our history. And that the basis of the difficulty is the growth of the extent of the dependence we've developed. So then while we have the ability to slowly increase our (world) energy options, our faster growing demand and dependence creates the crisis. Going much far backwards in living standards isn't a viable option but awareness of personal contributions to conservation/local generation can be a growing part of the solution. High on the suggested list: solar water heaters, electric transportation, and with some lag time less urban sprawl.

I wish there was more complete description of solar PV productivity being distributed. At this point, counting all manufacturing costs it is about twice as expensive as base line options. The Left/Green crowd talks like it is a conspiracy that solar PV is not being used more. I have solar water heat, experimental wind turbine, passive solar home, drive less than 8,000 miles per year and don't have solar PV because because I know better. I'm afraid that capital being spent building out solar PV is going to restrict equitable options in the future (though I totally support subsidized RESEARCH towards ~$1/watt!)

An example connecting comments from CLH and #51292 would be if a $billion tractor increased farm yields 25% and on paper solved the world's food supply, it wouldn't necessarily solve the world's food problem. The problem would be transferred from food to national debt. Oil is cheap compared to most alternatives, alternatives that cost significantly more than oil aren't part of the immediate solution.

Consider that the average 16 year old can purchase 1 gallon of gas for $4 and then safely move 3000 pounds 25 or more miles down the road in less than 30 minutes. For that cost, in that amount of time, I don't think the 16 year old could possibly find another way to accomplish that much work. Finding ways to make that work more productive becomes important as costs go up.

[ART005]

First line of my post should have said "trauma today...... come WITH relatively low..." not "come FROM.... "

Ooops, I don't do well typing in these little boxes, SEEKING ALPHA: How about a Preview Page prior to posting?

[RobertsJim]

The foregoing comments were all educational despite several taking excessive issue with the author's simple declaration; that is, high price of gasoline notwithstanding, we are living rich lives compared to our grandparents.

[fireball]

mickel98, agreement, only my view is harsher than you expressed. this started in my grandfathers day. from their perspective they were not being stupid. it was wonderful and futuristic i would imagine.

[AndréSautou]

There is a major difference between 1929 and now : at that time many sectors of economy could be operated without cheap energy. Consider, for instance, agriculture : it mainly worked with human and animal labor. The average distance traveled by food, from producers to consumers, was small. Other features : in most houses, electricity was just used for light ; urban cities were not so big and heavily dependant on transportation ; our world had not yet become addicted to fast growth, as it is now (thanks to cheap energy) ; etc …etc …
Now, we are heavily dependant on cheap energy, and all features linked to such dependence will crumble down as energy prices get higher and higher.

[fireball]

agreed andre. i am just pointing out that our grandparents were given a wonderful more efficient way which they embraced. maybe in the 50s or 60s but definitely in the 70s we should have seen the writing on the wall. i still have hope that amercan ingenouity from the private sector will find a way to profit and fix a piece of the problem.

[ART005]

Mickel98, nice post and so much shorter than mine.

This link goes to a long paper with lots of quantitative info about the size of the energy supply challenge going forward. My summary of it would be nuclear and advances in coal are the only real hope and even that doesn't address the liquid fuel necessities though more electric travel when possible is helpful towards that. And the time frame for those is worrisome.

www.peakoilassociates....

It respects contributions from wind, solar heat and other alternatives but it draws attention to their limit in density and possible rate of build out.

[Guy Fox inHavana]

This seems to be another fluff piece from another media propagan-duh bubble head employed by ruling class. His job is to tell the peasants (that's ewe folks) how rosie and wonder-fool things are... saying that the apple is only half rotten (as compared to the days/daze when all of it was rotten). Well... here's a little message for you and ewe... and pollyanna pundits like Marl Perry PHD (sic). When the common man sees his children cold and hungry... the drivers of gas hog luxury cars will dare not be on the roads. Old Coyote Knose... they'll be shot dead and then eaten!

[pockyclips2020]

CLH:

If you'd actually paid attention in science, instead of just attending as you and buddy W did, you would know ALL energy derives from the sun, including nuclear and hydro. The article itself should be filed in the "let them eat cake" folder.

There are too many people and not enough resources on this planet for everyone to try to live like us. Unless we bring balance to this equation, we are all doomed.

[Budman]

who cares what a 1,000 gals of gas would have cost back then since most people did not havecars to drive!!

[rbblum]

The US standard of living will naturally find a new, lower equilibrium point for having the pendulum swung excessively past the point of moderation in the western capitalism system.

Absolutely fascinating times in the history of the US being at the crossroads: Energy & Politics (leaning socialist, more and higher taxes as well as more entitlements at lower quality levels, more waste, fraud & abuse facilitated by bureaucratic environment, battling the environmentalists' ghosts, continual growth of the North American Forum with open borders and clemency of current illegals, weakening of the US military complex, Middle East powder keg).

[iThinkBig]

Indeed Rbblum, but really it is all about energy at the end of the day, isn't it? Every empire used some form of energy and were successful while obtaining the necessary fuel (Romans used slaves, we use oil). Pain will adjust the dense of mind and leadership not bought or bribed nor spoiled before entering office shall emerge. It's not going to be fun but I am staying in the country, it was earned the hard way and no doubt be reclaimed the hard way.

And for all you global warming/oil hurts the environment crap, well look at Al Gore's proposals in 1999 prior to the election. He was a BIG fan of liquified coal. You enviro people are so easily misled by politicians sometimes. Washington is on the dime and getting them off is possible but they aren't going to leave easy.

[iThinkBig]

Agreed, this guy is the glass is half full all the time. 'Hey you got iPods, what are you complaining about'. Well, what is being lost is freedom of mobility and the politics that say that is fair, we must live as they do in second and third world countries. Go back to the ivory tower Mark Perry, or begin posting solutions here.

[ED: Comment edited to remove abuse.]

[byork]

Well, we didn't have antibiotics in the 20's and 30's - So by your account, we should pay about $100 per capsule... Or die. Why not just line people up and fleece them without pretnse and ask them to smile!

[LuckyPierre]

We were much less dependent upon cars and other vehicles back in the 30s so the comparison is meaningless. In fact go back about 100 years and we might see how cheap today's light bulbs are in comparison - and so on.

[LuckyPierre]

We were much less dependent upon cars and other vehicles back in the 30s so the comparison is meaningless. In fact go back about 100 years and we might see how cheap today's light bulbs are in comparison - and so on.

[LuckyPierre]

We were much less dependent upon cars and other vehicles back in the 30s so the comparison is meaningless. In fact go back about 100 years and we might see how cheap today's light bulbs are in comparison - and so on.

[Scott Benson]

Having lower prices on electronic "gee-whiz" items like I-pods, DVD players and laptop computers (nice to have but are hardly necessary for true happiness in life) doesn't mean very much. Try comparing the REAL costs of good living: food & energy, health care, education. Toys aren't much of a measure.

[VelShan]

The price of Oil in 1930s is relevant today. And the article points out an important factor.

In 1930s there were not many car owners. The price reflected the maximum price that Oil Producers can charge to those who can afford it. It was very high for normal people to afford.

Today, that oil is purchased by Governments of all countries. AT ANY PRICE to ensure their own economy which relies motorized transportation is sustained. It is subsidized for a long time all around the world. That allowed for the cheap oil to become the normal state of affairs.

The price hike today is more like an Auction to find out the world Governments who can buy at the highest price. So far only a few poor countries have given up trying.
Major countries like China and India have even signed cooperation deals (despite their historical enmity) to form a purchase cartel. China is giving easy $2 Billion credit to African countries to secure their oil.

The price of American Oil was temporarily very low due to various factors. That is not sustainable.

The price of oil will and must become unaffordable to normal people again.

Solar Power or Wind Energy will not drive cars. They will be auxiliaries to Oil and will remain as such for a very long time.

The guys with money have all purchased the oil at very high prices. Oil that exist today and also Oil Futures that are yet to exist. This only means, the price will not go down for any time soon.

The only way this situation will end is the massive economic collapse around the world and reduction in oil usage. (NOT increase in Wind or Solar Power usage).

Another nightmare scenario is China, Russia, and many other countries will force US to pay for its debt (3 trillion and rising) so that they can pay for their high priced Oil. This will force a showdown that will be terrible for all world.

This article to me is most important reminder of reality.

[fireball]

so would it be wise to purchase a few oil stocks? i have but not the biggies. i believe medium and small seem to be doing better. guy fox if it gets that bad the guy in the fatcat car may be carrying better arms. i remember a decade or so ago in atlanta when two cops went sneaking around (wrong address) on private property. the owner was a competition shooter. two head shots in the dark. ithinkbig amen. rbblum i hate it but your post is on target. so where from here? surely coal liquification is progressing. the technology has been around for a long time. guy fox i liked your post. i am worried that we are in a spiral. hope for the best prepare for the worst? of this i am sure. the answer is never in washington.

[Dr.Chellappan]

America holds enough oil to supply its needs for 4 months. The President can decree to release them to oil companies at $50.00 per barrell and ask oil companies not to charge more than $1.50 for gas at the pumps. Tell oil companies to stop buying oil from Arabs for more than $50.00 per barrell.

Convene a meeting of all oil consuming countries and make a united front not to buy oil for over $50.00 per barrell.

Tell Arab countries they are choking world economy and this cannot be continued. If they insist on selling oil for over $50.00 threaten to boycott them to trade with other consuming countries.

If America does not buy any oil for 4 months and uses the above tactics, oil prices will come down to $50.00 or less per barrall and this will save America and the rest of the world.