Last year the average U.S. household spent just under $3,000 on gasoline, or about 4 percent of its income, according to the Energy Information Administration. With the exception of 2008, when oil peaked at $144 a barrel, that’s the highest share of income that’s gone to gasoline since the early 1980s, when it was closer to 5 percent.
If that seems high to you, remember the U.S. is on the lower end of the spectrum in terms of how much gasoline costs relative to income. In much of Western Europe, a gallon of gasoline accounts for about 6 percent of daily income. In China, it takes about 30 percent of an average day’s wage to buy a gallon of gasoline. Relative to income, gasoline in the U.S. is still super cheap.
And yet the share of U.S. income that goes to gasoline has roughly doubled in the last decade, from 2 percent in the late 1990s. This is essentially a price story, rather than one of higher consumption. Yes, we’re driving more than we did in the early 1980s, but total vehicle miles have gradually declined since they hit a peak in early 2007, at just over 3 trillion miles a year. As of Jan. 25, the U.S. was consuming about 18.2 million barrels of oil a day, down from 21.8 million in February 2007. That’s about as much as we were using back in 1996. Even though we’re driving less, the price of gasoline has grown faster than income.
A gallon of gasoline cost (PDF) an average of about $3.64 in the U.S. during 2012, the highest average price ever for one year. Gasoline is now about $3.42 on average in the U.S. A few things will determine where that goes from here. A slow, steady expansion in the economy will keep a floor under prices, while the continued boom in U.S. oil production should help keep them in check.