When I got my driver’s license, the price of gasoline was about 35 cents per gallon, but by the time I got my first car, three years later, the price had skyrocketed to 38 cents. It seemed at the time like highway robbery, so to speak, but we did get full service with that.
An attendant would pump the gas for you, and if you filled the tank he would also clean your windshield and check your oil. At some stations, you would get a free drinking glass to add to your collection of cartoon characters or dinosaurs or presidents or whatever.
These numbers say more about my age than they do about gasoline valuation. After all, you could buy a new luxury car for about $5,000 back then, or a pretty nice house for $20,000. A ticket to the movies was $1.50, which adjusted for inflation was more expensive than it is now.
According to the U.S. Energy Information Administration, the first oil well in the United States was dug in western Pennsylvania by a guy named Edwin Drake, in 1859. He was looking for kerosene to fuel lamps, and had no use for other oil byproducts, including gasoline, so they were just basically dumped out. This practice continued for the following 30 years, most notably by the great monopoly that became Standard Oil.
In 1892, the invention of the internal combustion automobile created a use for gasoline, and demand grew rapidly. By 1920 there were 9 million cars on the road, along with many thousands of stations providing gas, maintenance, and repairs. Gas was 20 cents a gallon, which is comparable to current prices, or at least where they were in 2020.
Gas prices climbed to about 30 cents during the Roaring ’20s, but fell dramatically with the Great Depression of the 1930s. Demand shot back up with the onset of the Second World War, when the government controlled the price at 21 cents and allowed each driver to buy four gallons per week.
Over the years since, the price has bounced around as the economy goes up and down, along with all sorts of other factors. A new refinery or pipeline might increase supply, a war or some move by OPEC might restrict it. Generally, though, a gallon of gas cost somewhere around $2.50 to $3.00 a gallon (in 2015 dollars) most of the time.
Lately it has seemed to move in only one direction. As I write this the average gallon of regular in my area sells for $4.39, up 8 cents this week and $1.11 over the past month. (Thanks, Vlad.)
Why is that important? Well, one reason is that we buy so much of it, around 338 million gallons per day. It affects everybody, even those who don’t drive cars, because it is built into the cost of almost everything we buy. (In the case of retailers, it also affects the price of everything they sell.)
Another reason is that gasoline has, for the past century, been a sort of benchmark measure of inflation that hits millions of consumers at a visceral level. It’s one product that we buy in exactly the same form, every week or two, measured in precise quantity. Every day, we drive by giant signs that offer us a current quotation, down to one one tenth of a cent.
These days, there is another element to the gas-price issue as well. Transportation is the biggest emitter of carbon in the United States, contributing about 29 percent of all greenhouse gases. Cars and trucks account for the majority of those emissions, which makes them a target in the effort to slow climate change.
Ten years ago there were virtually no all-electric vehicles on the road in this country. In 2020 they made up 2 percent of vehicle sales, which is expected to exceed 4 percent this year, and to continue to double every couple of years through the next decade.
The trend is not really being driven by consumers, who still tend to fear the newer technology, but more by government, corporations and the carmakers themselves. Each of those players has its own motivations.
The carmakers simply see the handwriting on the wall. They know EVs will eventually dominate auto sales, and that the real question is who is going to build them. The upstarts like Tesla, Fisker and Rivian have a head start, and support from Wall Street, but the legacy brands have name recognition, dealer networks and manufacturing capacity.
They will need all of that, plus an enormous amount of capital. Ford alone is putting $11.4 billion into plants in Kentucky and Tennessee that will build EVs and the batteries that run them.
One of the vehicles that will be manufactured there is the electric version of the world’s most popular truck, the F-150. Ford stopped taking orders for the new “Lightening” when it hit 200,000, which is the most the company can possibly build in the next two years. It is just one of 40 new EVs that will come online by the end of 2022.
Many of the vehicles will be snapped up by corporate fleets. A survey last fall of 28 major companies showed that they planned to purchase nearly 400,000 EVs over the next five years. Corporations are seeing a significant benefit to their bottom lines due to lower operating costs and less maintenance. No doubt they will also be quick to claim credit for their environmental commitment.
It is up to government, however, to take the lead in reducing carbon emissions, because the other sectors will tend to act in their own short-term self interest. To that end, the federal government has long sponsored a $7,500 tax credit on the purchase of a rechargeable, battery-dependent vehicles, and Congress is negotiating with itself on an additional $4,000 incentive on union-made EVs assembled in the United States.
Probably more significant, the so-called infrastructure bill includes the funding of a nationwide network of EV charging stations. It will be up to the states to “strategically deploy” the stations.
One of the first toys I remember from my childhood was a racetrack with two cars that were powered by electricity that was run through the track itself. Recently I read in the paper that one state is looking to do the same thing with real roads and real cars.
It strikes me as ironic that we used to build models of internal combustion cars and power them with electricity. Perhaps now we can build models of electric vehicles and make them rechargeable.
So, what does all this have to do with the price of gasoline? Well, eventually it will reduce demand, which should drive down prices. Meanwhile, we’ll just have to ride it out.
You can e-mail Kevin at kfahy@fwpi.com
