The next time that you go the local gas station, take a look at the prices and think about that cost as a single gallon or liter. As you are absorbing the real money cost figure, think about what that amount of money is really worth to you. If the per gallon price is $3 you can get a rough idea of the time value of that gallon based on your estimated wage. For instance, assume that you are a salaried employee who earns $30,000 per year. Generally, the accepted number of hours in a man year
is roughly 2000 — 50 weeks of 40 hours — so a per hour wage of $15. If this is your situation, pumping one gallon of gas into your vehicle is worth 12 minutes of labor. For a minimum wage earner, the value of three dollars is roughly 34 minutes of labor — assuming a per hour wage of $5.25 taken from the Department of Labor.
While the minimum wage earner might be shocked to have to work more then half an hour for a single gallon of gas, it’s not what I want to focus on here. What I want you to attempt to fix in your mind is the personal value that your equivalent period of time is worth. You might consider the value of 15 extra minutes of exercise or half an hour reading a book or and extra seven minutes of sleep. Whatever your personal value is, I want you to consider the following which actually occurred in Milwaukee earlier this week.
Two vehicle crashes occurred, four people were arrested for fighting and three officers got sent to the hospital — all over some free gasoline Wednesday.
For the most part, hundreds of drivers waited patiently for hours for about $30 worth of free gasoline from Allstate Insurance as a reward to Milwaukee for ranking high on its safe drivers list.
Minneapolis Star Tribune
Milwaukee gas giveaway sparks crashes, arrests
Reward the citizens for their good driving and fist fights and car crashes are the result. Great! My guess is most of them shouldn’t even have been interested. Considering best case economics of the situation, a minimum wage earner would have been given almost a full days worth of gasoline. While this sounds like quite a lot of money, we first have to consider the costs associated with acquiring the goods. The largest expense would be personal time which will directly offset the savings associated with free fuel. Consider the following from the same article:
Local insurance agents started pumping the gas at a Milwaukee service station at 6 a.m. The giveaway lasted a couple hours, Schwartz said.
Clarence Jefferson said he thought he’d be first in line when he got there at 4 a.m., only to find hundreds of others already ahead of him.
Minneapolis Star Tribune
Milwaukee gas giveaway sparks crashes, arrests
Mr. Jefferson invested two hours before the gas started pumping, and I’ll generously suggest that he invested another hour waiting in line after. If Mr. Jefferson makes more then 30,000 per year or roughly $15 per hour, then he is a looser in the deal. The break even point is roughly $20,000 or $10 per hour. A four person household with an income of $20,000 is at the poverty level according to the Department of Health and Human Services. Everyone in that line should have had a desperate need.
Why would someone make the poor decision to sit in line for three hours to get roughly ten gallons of gas? Because the perceived value of a free
gallon of gas is unrealistically high and there’s only so much of it to go around. In the end, it’s a great demonstration of what we can expect to see when it becomes common for fuel to be a scarce resource.
As a result of reading the fishwrap article, I went looking for pictures of the lines at gas stations during the energy crisis in the 1970’s. Along the way I came across the PreWar Buick pages which talks about World War II rationing. Interestingly, on the back of the A
sticker is the sentence, Is this trip really necessary?
I wonder how many people ask themselves that question today.
