The portion of pre-tax household income consumed by gasoline is in the danger zone for the US economy. In 2012, gasoline cost an average household $2,912 and devoured 4% of pre-tax income. Ouch!
The last times that gasoline hit the 4% mark was in 2008, and high gas costs contributed to plunging the US economy into a near depression, as consumer demand collapsed and millions of jobs were lost in just a year. But with the exception of 2008, you have to go all the way back to 1983 to find the last year when gasoline ate 4% of pre-tax income. Indeed, from 1978 to 1983, gasoline costs consumed 4% to 5% of pre-tax income and the results were both high unemployment and inflation--stagflation--that drove up and up the Misery Index.
As in the 1978 to 1983 period and in 2008, high oil and gasoline prices remain a principal threat to the US economy. But what is different now is that the US need no longer be over the oil barrel. Yet, we are.
Why? A massive market failure and policy failure continues to prevent the widespread, rapid deployment of compressed natural gas, electricity, and biofuel fueling stations and vehicles.