Saturday, December 08, 2007

Gasoline now costs less as fraction of net worth

Mark Perry’s blog (Hat Tip Greg Mankiw) graphs gasoline prices compared to average US household net worth 1947-2007. As a percentage of net worth, consuming 1000 gallons of gasoline in the US these days costs less than at any time prior to 1985. I assume, the same story for Australians. Rising wealth is insulating us from the prospects of reduced oil availability.

A discussant on Mark's blog points out that the decline in effective expense would be greater if improvements in full use efficiency were accounted for.


conrad said...

It would be worthwhile also adding avg. kilometers driven, which is sure to be more due to expanding cities, and car efficiency, which would trade off with it. This would give you a better idea than the current graph.

Bring Back CL's blog said...

This is completely useless.

you do not pay anything out of net worth you pay it out of income.

It would be far far better to show it as a % of household disposable income.

I believe this is now compulsory in Rudd's republic

Chris Lloyd said...

I wonder if net worth is the best denomiantor to use - since it can be distorted by asset inflation, not to mention household liquidity. Wouldn't household income be better?

Chris Lloyd said...

...sorry. Should have read BBCLB's comment first.

whyisitso said...

Harry no doubt thinks this is a very bad thing - see the immediately preceding post on climate change. Down with capitalism - the underlying cause of all our worrying disasters.

hc said...

The points being made about income are also here. In my view its a perspective on the cost of petrol.

Ultimately your consumptiopn possibilities are determined by your wealth but many people don't have much wealth and/or are liquidity constrained by their income.

Whyisitso, As someone who has preached the virtues of capitalism for 30 years I am intrigued by your comments.