One of the many benefits of getting older is remembering experiences from earlier years. I remember buying my first car, at age 16, for $300. It was a 1966 VW bug with an air-cooled engine. I immediately set off to do the required maintenance work to the vehicle and add my own personal touches. The first time I filled the gasoline tank with regular gas, it cost me around $6. What is amazing is that it seemed like a lot of money to me at the time!
In the ’70s, self-service stations were not as prevalent as they are today. Instead of swiping your debit card and pumping gas yourself, you would drive to a gas station and the attendant would ask how much gasoline you wanted, then check your oil, and then clean your windshield. This was considered part of the service and was factored into the price of the gasoline. Gas stations today seem be dedicated to fueling your car and to fueling your body with convenience store items.
Today, it’s rare to check the oil or go inside the store to pay for gas. It is amazing how much has changed. The financial impact gasoline has on our budget and overall spending has also changed.
The price of gasoline has increased over the years.
Way to state the obvious, right?
Here is what is remarkable about gasoline – the price has actually stayed stable when adjusted to 2013 dollars. Granted, it made a big spike after 2005, but we are now seeing prices drop considerably due to the price of oil and other factors.
In 1977, where I lived gasoline cost around $.59 per gallon. That certainly sounds cheap now! I was making only $2.35 an hour minimum wage, working part time for a fast food hamburger joint. I had to work 2.51 hours ($5.90 for 10 gallons/$2.35 minimum wage = 2.51 hours) to fill the gasoline tank with 10 gallons. BTW, I am not considering taxes in this discussion in order to keep the math simple.
Notes: Retail price includes Federal and State Taxes. Price is for Regular Leaded Gasoline until 1990 and for Regular Unleaded Gasoline thereafter. Constant dollars calculated using the Gross Domestic Product Inflation Index. Source: Energy Information Administration, Monthly Energy Review, Table 9.4.
Today, our gasoline cost $1.63 per gallon for regular gas in Sedona, Arizona. If I had the same 10-gallon fill-up, it would cost me $16.30. The 2016 US minimum wage is $7.25 per hour, so it would take 2.25 hours ($16.30 for 10 gallons /$7.25 minimum wage= 2.25) of work to fill up the gasoline tank. In 1977, I had to work 2.51 hours; today, I would have to work only 2.25 hours, if I still made minimum wage.
Hold on, there is a problem here – 48 out of 50 cheapest gas stations in the US happen to be in Arizona right now. The price of gasoline in my former Colorado hometown is $1.86 per gallon today. So comparing in 2013 dollars (this is the newest data I found), we are within $.07 of the adjusted price compared to 1977 ($1.86 today – $1.79 2013 adjusted price = $.07 difference).
What’s that you say: but you don’t make minimum wage now!
Ok, I admit it. With nearly 40 years in the work force, I don’t make minimum wage anymore. There is no need to go down this particular math and income rabbit-hole showing that I only have to work 12 or 13 seconds to fill up my gas tank. Of course, I am exaggerating to make my point, folks!
It used to be a big thing to fill up the tank and I had to make sure we had enough money in our bank or in my wallet to pay for it. This was especially true in my 30s, when I had multiple car payments, a mortgage payment, and various other debts and obligations. The reduction from our bank balance does not even come to my mind when we go to the gas station today. However, I do attempt to find the cheapest gasoline, of course without driving miles out of our way.
The only time we discuss the price of gasoline now is once a month when we are finalizing our budget. We have a line item for vehicle expense that includes accruing for insurance and repairs, saving for our next vehicle, and the gasoline we estimate is needed for the new month.
Guess what? We also drive fewer miles.
We have mentioned that for many years we were a one-car family. We tend to drive only 3,000 to 4,000 miles a year. We have used mass transportation, such as BART, buses, trains, and airplanes to do the majority of our travel. Many of our errands were completed by simply walking or riding our bikes.
Reflecting back to my teens, I was driving an average of 12,000 to 15,000 miles a year. Today, I drive a quarter of those miles. That fact alone slashes our annual cost of gasoline, no matter how you look at the 2013 adjusted price to 1977 dollars.
Our cars have also become more efficient, resulting in better fuel economy. There are many cars getting 40 MPG or better highway mileage today. When I compare the mileage of my F150 Ford truck with a V8 engine to the 1966 4 cylinder VW Beetle, the truck gets only 1 MPG worse mileage on the highway than the bug!
Wait a minute, haven’t the prices of cars gone up?
True, the price of cars is higher today than 30 years ago. Let’s see how they compare.
I went to the Kelly Blue Book website to check out what an 11-year-old Beetle would cost. I used the ZIP code I lived in when I was 16 and figured mileage at 9,000 miles per year, meaning the car would have about 100K miles on the odometer. The website came back with a private party sell of $2,360.
Using the same minimum wage as a basis of income, how many hours would you have to work to buy an 11-year-old VW Beetle in 1997 vs. 2016?
When you compare the number of hours or weeks needed to work at minimum wage, a VW Beetle has become more expensive. Granted, I may have bought my first car for under the market value (because I bought it from my mother!) and that is skewing the numbers.
Maybe cars have gotten 2.5 times (8.1/3.2 = 2.55) more expensive based on minimum wage. However, looking up MPG on the 2005 Beetle, VW claims 28 MPG, so we are improving the mileage by 7 MPG on the highway. We also gain a bunch more improvements with technology and horsepower. Check this out:
I have determined that I may have to pay more than twice as much for a used vehicle today as in 1977 (taking into account minimum wage); however, we have gained many technological improvements along the way. The safety, comfort, and gas mileage features stand out the most.
What is my point about the price of gasoline?
Am I getting old and tending to reminisce a lot? Do I spend too much time thinking back on how cheap things were? Am I using “fuzzy math” and things are actually less expensive now when we account for inflation?
All of the above are true. I do tend to reflect on my experiences. There have been numerous studies that show more happiness is derived from experiences than things. I am working on my happiness here, folks!
Yes, gasoline was cheap at $.59 a gallon in 1977 compared to $1.63 a gallon in Arizona today or $5 a gallon in California a few years back. When you compare the historical costs of gasoline from the adjusted 2013 dollars, the story begins to change. We are paying $1.63 a gallon in 2016, which adjusted to 2013 dollars is $1.79 per gallon. That means gasoline, when compared to the Gross Domestic Product Index, costs less money today than in 1977 when gasoline seemed cheap at $.59 a gallon. That holds true in my minimum wage comparison as well, taking less work hours today than in 1977 to fill up the tank.
The biggest factor that has changed for me is that I have progressed in my profession (since my fast-food days in 1977), making more money, saving a large percentage of our income, and investing the difference. After doing this for multiple decades, great things begin to happen. You are able to build some net worth and a passive income that at some point can support your lifestyle. For me this has made the cost of filling up seem insignificant compared to when I was in my teens.
The lesson here is to start saving and investing early so that you don’t have challenges putting gas in your car when you reach your 50s and 60s. I know that, for many, this is a problem today. Why worry about the cost of gasoline in our retirement? The sooner you decide to not spend every penny you earn, the sooner you will see some results, and filling up the tank will be only a time constraint – not a money issue.
When you think of filling up the tank, what comes to mind?
Photo Copyright : Alina Pavlova (Follow)