The price of petrol

Is petrol more expensive for consumers today than it was in the 1970s? An interesting question. One way to answer it is to adjust the price of price in 1970s for inflation and compared this adjusted price with the price today. For the US

The average retail price of a gallon of 87-octane gasoline in 1979, in the U.S., was 90 cents. Adjusted for inflation, a gallon of regular gasoline retailed in 1979 at $2.67 reckoned in 2008 dollars -- more than a dollar less than gasoline is retailing for today.

Or so writes Don Boudreaux at the Cafe Hayek blog. Thus petrol prices are higher today.

Or are they?

Boudreaux continues

While the inflation-adjusted dollar price at the pump for gasoline is indeed higher today than it was during the disco decade, consumers' expense of acquiring gasoline is arguably now lower. The 1970s were notorious for long queues at filling stations. These queues meant that consumers back then paid not only with dollars at the pump, but also with hours spent waiting in line (not to mention suffering anxiety over the prospect of being unable to get gasoline at all).

The average price of a gallon of gasoline in 1979 was (in 1979 dollars) 90 cents. So if a worker in 1979, earning that year's average hourly wage of $6.19, spent one hour waiting in line to buy five gallons of gasoline - a standard maximum amount that filling stations would sell to customers during periods of shortage - he would have spent, waiting in queues, $1.24 worth of his time for every gallon he bought. The total cost per gallon to him would have been $2.14 ($0.90 in cash expense plus $1.24 in time expense). $2.14 in 1979 was worth about $6.36 of today's dollars -- a cost per gallon much higher than the roughly $4 that we Americans now pay (without having to queue up for the privilege of filling our tanks).

So taking into account the full cost of petrol, petrol price plus queueing costs, petrol is cheaper today.

Compare this calculation with this one from my blog posting Petrol prices are high? In that posting I looked at a calculation by Mark Perry at the CARPE DIEM blog. Perry looked at the cost of 1,000 gallons of petrol in the US as a percent of US per-capita disposable income, annually back to 1929. He showed

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!

So in the US at least petrol still looks cheap.