How high are gasoline prices in comparison to the past? This question is useful to assess negative impacts of the recent surge in prices.

Recent gas prices are certainly higher than in the 1980s and 1990s, even adjusted for inflation. On the low side, a gallon of regular averaged 72 cents in 1986 and 74.2 cents in 1994, excluding federal and state taxes, according to the Energy Information Administration. Adjusting for inflation, the 1986 price equals $1.23 per gallon today. The 1994 price is 94.7 cents per gallon. Highs were in the early 1980s, with the price at $1.06 per gallon, excluding taxes, in 1983, which comes to $2.02 in today’s dollars. Adding in taxes would make the 1983 price approach some of the postings we saw late last month.

Since the 1980s, much has changed to soften the impact of these price increases. First, consumers’ incomes have increased more rapidly than inflation so that higher gas prices do not take a significantly greater portion of a typical household’s budget. Second, fuel efficiency has increased so a unit of fuel generates more output.

To illustrate the first point, 1,000 gallons of regular gasoline cost $1,066, excluding taxes, in 1983. This was 5.1 percent of the Census Bureau’s estimate of U.S. median household income of $20,885 in 1983. Today the percentage, assuming a price of about $2.50 per gallon (excluding taxes), is a slightly higher 5.6 percent of the 2004 median household income of $44,389. Recent numbers certainly compare unfavorably to the decade-low gas prices in 1986 and 1994, when the cost of 1,000 gallons equaled 2.9 percent and 2.3 percent of the median income levels for those years, but adding the taxes, which are mostly in the form of a set amount per gallon, impacts these lower percentages relatively more.

The second point is that technological change means that the comparison of the cost of 1,000 gallons does not tell the whole story.

Fuel economy has increased noticeably since the 1980s. For example, according to the Department of Energy, a 1985 Honda Civic with automatic transmission got about 29 mpg, using a calculation rule of 45 percent highway miles and 55 percent city miles. A 2005 Civic gets 34.7 mpg, calculated with the same highway/city miles combination, according to numbers from Honda’s Web site. Comparing prices and fuel efficiencies means that the 1,000 gallons of gas in 2005 will fuel 34,700 miles of driving for a cost of 7.2 cents per mile at a price of $2.50 per gallon. Combining the 1985 price of gasoline of about $1.00 per gallon with the estimate of fuel efficiency for that year produces a cost per mile of 3.4 cents, or 6.0 cents per mile in today’s dollars. In this example, the cost per mile has increased about 20 percent in real, inflation-adjusted terms. This is a letdown with a recent memory of $1.80 per gallon, when the cost per mile was about 5.2 cents, or 13 percent lower in real terms than the 1985 rate.

With a declining burden of transportation as the norm for many years, interruptions in this trend are an unpleasant surprise. But in relation to income changes in inflation-adjusted dollars, the amount of a household budget spent on transportation is not greatly different from most of the levels in decades past. It’s unpleasant news but not a calamity.