This article was published at Gale Winds on 1/4/2024.
While the price at the pump is interesting, the time it takes to earn the money to fill your tank is what really counts.
The Bureau of Labor Statistics reports nominal gasoline prices and average hourly earnings. Dividing one by the other gives us the time price. It is the change in the time price over time that reveals our true economic condition.
Since 2013, the average time price of a gallon of gasoline has been around 6.34 minutes. The lowest time price was 3.75 minutes in April 2020 when COVID-19 lockdown policies were suppressing demand. The highest price was 9.43 minutes in June 2022 when supply and demand were going in opposite directions. The trend line indicates that the time price will continue to decline, suggesting an increase in gasoline abundance.
US crude oil production hit a record high of 13.21 million barrels per day in September 2023. This was up 88.7 percent from 7 million barrels per day in January 2013.
The United States is the world’s leading energy producer of crude oil and natural gas, with over half of the wells on the planet.
US energy entrepreneurs created horizontal drilling and fracking. The major reason the United States leads this industry is because we don’t have a bureaucratic state-monopoly energy company, and people have subsurface property rights. That means that individuals own the oil beneath their feet and therefore have a great incentive to drill.
What’s more, we discover valuable new knowledge every time a new well is drilled. This accumulation of knowledge is really our most valuable energy resource. Note how each rig is “getting smarter.”