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Figure 5

U.S. Gasoline Price Comparison (1998 $/gallon)

$2.50

$2.31

Tax

$2.19

$0.25

Base Price

$2.00

$1.50

$1.12

$1.00

$0.43

$0.50

$0.00

1920

1981

1998

Sources: American Petroleum Institute; Energy Information Administration.

line or diesel powered. Liquefied petroleum

1981's high (in present dollars) of $2.39 per

gas or compressed natural gas powers

gallon, despite a higher burden of state and

federal taxes (Figure 5).1 2 5 Of the many retail

almost all alternatively fueled vehicles. This

gives fossil fuels more than a 99.9 percent

liquid products, only low-grade mineral

share of the world motor vehicle trans-

water is cheaper than motor fuel today.1 2 6

portation market, a market share not

This points to the triumph of technology in

unlike their share in California or the

converting crude oil into motor fuel and

United States as a whole.1 2 3

other products, a story not unlike the one of

improving economies of turning natural gas,

The cost of buying, driving, and maintain-

oil, and coal into electricity.1 2 7

ing gasoline-powered vehicles has steadily

declined over time. Adjusted for inflation

The affordability of motor fuel has also

and taxes, the price of a gallon of motor fuel

improved in terms of work-time pricing (the

in 1995 was the lowest in the recorded histo-

amount of work time an average laborer

ry of U.S. gasoline prices. The weighted aver-

must put in to buy an asset). In the 1920s a

age price of gasoline of $1.27 per gallon1 2 4

gallon of gasoline cost more than 30 minutes

of labor time. In the mid-1990s the cost was

included 45 cents of local, state, and federal

6 minutes and falling.1 2 8

taxes, leaving the "free-market price" of crude

acquisition, refining, and marketing at

The declining work-time cost of an auto-

between 80 cents and 85 cents per gallon.

mobile, even with numerous advances in

Some of the "free-market price" includes the

vehicle comfort and environmental perfor-

aforementioned "environmental premium,"

mance, has been documented by W. Michael

given that environmental compliance costs

Cox and Richard Alm:

are built into the price.

The price of regular unleaded gasoline

In the currency of work time, today's

averaged $1.12 per gallon in 1998--a new

Ford Taurus costs about 17 percent

record low and less than half the price of

less than the celebrated 1955 Fairlane

22