A gas price surprise follow-up

Like many other readers of The Times, I read an article on our opinion page last week that carried the headline "A Big Surprise on Gas." And, indeed, co-authors Indur M. Goklany and Jerry Taylor wrote something that surprised me: they concluded that by their measure, gasoline was more affordable now than it was back in 1960.

Goklany and Taylor based their findings by measuring how much Americans spent on gas versus Americans disposable income (which is basically income after taxes) both in 1960 and now.

That's a reasonable calculation, of course, with one obvious problem: lumping everyone's incomes together in one big calculation wipes out the disparity in Americans' incomes.

Curious about their assertion, I began playing around with some statistics that are available to everyone on the web. Here's what I found:

1. If you visit the U.S. Bureau of Economic Analysis website, you can look up disposable income over the years, as well as the amount Americans spent on gas over the years.

Using the latest numbers available, I calcuated that Americans spent about 3.2% of their incomes on gas in the fourth quarter of 2007 versus 3.2% percent in the fourth quarter of 1960.

2. Next, I went to the U.S. Census Bureau website, thinking it may be a more accurate measure to see how much gas cost the average household. But I quickly encountered a bump in the road: the Census Bureau changed the way it calculates household income in 1967 and going back to 1960 would likely produce an inaccurate result, said Andy Hait, a Bureau statistician.

So, I went with the best numbers available and tried to determine how much 500 gallons of gas would cost the average household in 1967 compared to 1,000 gallons of gas 2006 (I was trying to account for the fact that Americans drive more now, albeit in more fuel efficient cars). The average price of a gallon of regular leaded was 33 cents in 1967 and $2.59 for a gallon of regular unleaded in 2006, according to the U.S. Energy Information Agency.

The result: Americans spent about 2% of their household income on gas in 1960 and 3.8% in 2006. I would advise taking that calculation with a grain of salt because of the variables involved: the fact that gas is more expensive in 2008 than 2006, the mileage driven by Americans now versus in the 1960s, the number of cars owned by Americans, the number of women working now versus then and so on.

3. Finally, I did the easiest calculation of all: I went to the Federal Reserve Bank of Minneapolis' online inflation calculator and typed in the average price of a gallon of regular gas in 1960 -- 31 cents. The calculator said that if the price of gas tracked the rate of inflation, a gallon of regular should be $2.26 these days.

So there you have it -- like a lot of things involving statistics, determing how much gas costs Americans depends on how you look at it.

And, for what it's worth, I happen to think Goklanky and Taylor raised a very good point in their article: Americans tend to notice gas prices because of all the big signs and media attention focused on it. We tend to forget about all the other things we spend money on that didn't exist in 1960 -- like the iPhone sitting on my desk.

--Steve Hymon

Comments

[Bart Reed]

There are a couple other key expenses that are being ignored here. how much was a bottle of water in 1960, 1970, 1980, 1990, 2000 and 2008? How much per gallon? How about the same for soda pop? How about household electricity for the same span? What about auto related costs during this span? Tires, batteries, car insurance, body shop rates, engine repair / maintenance rates, parking? It is interesting to obsess on just the fuel price, but most folks also think the only cost to drive is fuel, ignoring maintenance, overhead, depreciation, parking,car payments and interest. It really costs 50-75 cents per mile to drive, when you factor in the full burden.

Just another point: Transit is vastly underpriced, expecially in Los Angeles. In a city with a strong investment in transit service, Toronto, a basic ride is $2.75 and a day pass is $8. What about rail costs in London? In Los Angeles, we waste subsidy funds on keeping the retail price way too long and compensate with inadequate amounts of service. The wrong model, but local elected officials have math trouble.