Gasoline prices this Memorial Day weekend are about $3.67 per gallon, about 12 cents less than last year and down about 27 cents from their peak in April. Gasoline prices were higher, on average, in 2011 than any other year and 2012 looks to be about the same. The nominal price of gas peaked in 2008 but fell rapidly as the recession hit the U.S. economy and ended the year at under $1.70 per gallon. Although there are some news reports that households will drive more and travel further for vacations in the summer of 2012, any increase in travel will occur despite historically high gasoline prices.
One way to measure the relative change in the price of gasoline over time is to compare the price of a gallon of gas to the wage rate of a typical worker with a given set of skills. The following chart calculates the number of gallons of gasoline that the median high school graduate could afford to purchase with their gross (pre-tax) earnings when working full-time. In 1998 the median high school graduate could afford over 463 gallons of gasoline with their gross weekly full-time earnings. By 2011 the median high school graduate could afford less than 182 gallons of gasoline with their gross full-time paycheck.
The typical blue collar worker had to work 2.5 times as many hours to fill their car’s gas tank in 2011 compared to 1998. The situation looks no better for working class families in 2012. The price of gasoline increased by 9.5% from the first quarter of 2011 to the first quarter of 2012. This rate of increase was more than three times as large as the increase in the median weekly earnings of high school graduates.
The outcome of the Presidential election will depend on consumer confidence and the perceived state of the economy in swing states in November. Working class families are likely to be encouraged by the decline in the unemployment rate and private sector job creation over the past 18 months. But optimism about the recovery will be muted by the fact that weekly earnings for blue collar workers have increased very modestly while the price of gasoline has more than doubled since the depths of the recession in early 2009.