Monday, February 15, 2016

Price of gasoline (and changes in other costs) during my post-college career . . .


We all have noticed that gasoline prices have plummeted in recent months. Getting gas several days ago, ($1.65/gallon regular in New Jersey USA), I noted to myself that, except for the oil price crash and immediate rebound in December 2008, prices had not been this low since late 2006.

Since owning my first car, a 1963 Volkswagen Beetle, in 1972-73 (my last year of undergraduate college), the price of gas at various times has stuck in my mind, frequently related to career milestones. In the spring of 1973, the price of regular grade gas was ~$0.35/gallon. In late 1973, the price rose to over $1 due to the Arab Oil Embargo in retaliation for US support of Israel during the October Yom Kippur War. During that shortage, I luckily only had to wait once in one of the infamous long gas station lines since, besides having the fuel-efficient VW, I used daily bus transportation to get to my first job, in Washington, DC.

The next gas price that sticks in my mind was in the summer of 1980 when I was driving 80 miles round-trip daily to my geology Master’s thesis field area in central New Hampshire USA. I was mapping Siluro-Devonian sillimanite-grade metasediments, and associated granites, as part of a revision of the bedrock geologic map of New Hampshire, and now driving a 1967 VW Beetle (green again). My transportation expenses were reimbursed, and I noted the amount, total cost, and price per gallon in my field books. In June 1980, I paid $1.25/gallon; in the autumn, it was $1.23/gallon. The historical charts below, one for crude oil price and one for US gasoline price, show a peak in prices during that time. In adjusted dollars, this was the highest crude price before 2008. The peak in crude oil is in December 1979, but, while rising since late 1979, the peak in the “price at the pump” is delayed until 1981. The Iranian revolution and dramatic decrease in Iranian oil production was the cause of the price increase in crude and refined products (https://en.wikipedia.org/wiki/1979_energy_crisis).

From http://inflationdata.com/articles/inflation-adjusted-prices/inflation-adjusted-gasoline-prices/


From http://inflationdata.com/Inflation/Inflation_Rate/Historical_Oil_Prices_Chart.asp


When I eventually went back to graduate school for a Ph.D., it was 1993, and I was commuting 180 miles round-trip four days a week from my home in Pennsylvania (PA) to the Lamont-Doherty Earth Observatory of Columbia University, just outside New York City. (I certainly was not the only person doing that daily commute: hundreds of people from eastern PA commute by car or bus to NYC for work.) I would buy my gas a couple miles from home in New Jersey where price of gas is historically a bit cheaper than Pennsylvania, and gas stations are only full-service. (New Jersey and Oregon are the only US states where self-service gas is illegal.) The general price was $1.15 - $1.25/ gallon during my several years of commuting, not really different from 13 years before. (I did visit Oregon in 1998, and the price there was notably higher : ~$1.80; I don’t know if that is due to distribution costs, wages, or taxes.)

From then until 2005, I don’t remember anything remarkable about the price of gas, but on my way in fall 2005 to visit the site of the ICDP-USGS deep drilling project into the moat of the Chesapeake Bay impact structure, I remember the gas price on the Delmarva peninsula was ~$1.80, definitely higher than NJ or eastern PA. The gas price chart above shows 2005 was the start of the steep increase in crude oil prices, culminating in the summer 2008. During that peak in gas prices, I was commuting 450 miles round-trip per week from PA to the US Geological Survey, outside Washington, DC, for my postdoctoral fellowship work (2006-08) on the Chesapeake Bay impact structure, and eventually paying over $4/gal for gas.

Before the recent fall in oil prices, in 2012-2013, the price of gas was around $3.50, so a tenfold (10X) increase since $0.35/gal in 1973. How does this 10X increase, compare to some other prices I can remember over the same general period? (I am listing actual or nominal prices, not adjusted for inflation.)
  • In January 1968, my father bought a new Mustang convertible car for $3200 (price remembered by my brother). In 2016, a Mustang V6 convertible retails for $30,045 (same region as original purchase; http://www.ford.com/cars/mustang/pricing/), a 9.4-times increase. This is comparable to the 10X increase in gas prices over approximately the same period.
  • My first apartment, in the Riverhouse complex in Arlington, Virginia, was about $150/month in 1973-74. Today the same studio apartment in the same building is $1429/month, a 10X increase.
  • My parents bought a house in 1971 for $90,000 (sold it in 1995); it most recently sold in 2013 for $1,445,000, an increase of 16X. 
  • The tuition at Dartmouth College for 1972-73 for one year was ~$3100; for 2014-15, it was $46,764: an increase of 15 times over that 42 years before. The increase in these last two cases is similar, but both are more than the 10X increase in gasoline prices.

On the other hand, looking at changes in salaries and wages is not encouraging:

With the information on the Riverhouse apartment vs FSO salary, we can also examine what portion of that income goes to housing now compared to forty years ago. In 1974, 19% of my income went to apartment rent; today, that portion (same apartment, starting FSO salary) would be 28%.

Admittedly, these price change examples are few. Other commodities of daily living like eggs, milk, clothing are not included. My parents' house was in an upscale suburb of New York City, Dartmouth College is a selective private university, and, therefore, increases may not be representative. (And, I certainly am no economist.) But, these few examples of relative increase in cost put some numbers on feelings, despite recovery from the Great Recession of 2008-09, of personal economic frustration in the US, particularly the affordability of US higher education and housing relative to income.

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