What the Elites Are Missing About Auto and Gas Prices

We Americans love our cars. We love them so much that songs are written about them, from pink Cadillacs to little red Corvettes. Our cars represent freedom, and the American dream itself. But they're also an essential part of life for all but those of us who live in crowded urban areas where mass transit prevails.

Our cars get us to work, school, church, shopping, entertainment, play and adventure. Life without our cars is not merely unimaginable for most of us; it's unlivable.

Despite a seemingly endless push by America's cultural and political elites to separate us from our cars—and get us to live in more densely populated spaces with public transportation—we've resisted their pleas and prompts. According to the Pew Research Center, the urban population in America has remained constant at 31 percent, while suburban populations have increased slightly, from 53 to 55 percent from 2000 to 2016. Rural living, far from dead, has declined slightly, from 16 percent to 14 percent during the same period.

Which means 70 percent of us choose to not live in crowded urban spaces that the cultural elites think are so great. We do so because the other part of the American dream is owning our own home. The house with a patio, a pool and some green space, if just a little, to call our own. And a garage in which to put our cars.

The spiraling cost of homeownership has been a big subject in the past few years, and there are many causes—with the easy money policy of the Federal Reserve being chief among them. But less discussed is the rising cost of car ownership. It's a grim picture for working- and middle-class Americans.

"Cars on American Roads Keep Getting Older" ran a headline on CNBC's website. "The average age of a car on U.S. roads rose to 12.1 years in 2021, according to IHS Markit. "In 2002, the average age was 9.6 years old," CNBC reported.

Less than 5 percent of the American public's massive car fleet—276 million cars—consists of new cars. In 2018, 40.2 million used cars were sold, compared with 17.2 million new cars. Worse, the average selling age of the used cars in 2018 spiked to six years old from four in just a decade—a 50 percent leap.

Moreover, the price of used cars spiked precipitously because of supply chain problems in the automotive sector, with increases of over 40 percent. "Average Used Car Prices Soar to Over $30,000," a headline in Motor Trend magazine said recently. "With prices this high, the average person might not afford a used car," the sub-headline noted.

So too has the price of new cars, which spiked dramatically year over year starting before the pandemic. "New car prices keep climbing, with average climbing to almost $47,000," the headline of Car and Driver read in December 2021.

According to Kelly Blue Book, the average price of a car rose $1,800 in 2019, jumped another $3,300 in 2020, and an astonishing $6,200 in 2021.

What's going on? It turns out we're staying in our new and used cars longer than ever because we can—modern cars last longer than their predecessors. But we're also keeping our cars longer because we have to. Because we can't afford not to.

The ever-escalating costs of new and used cars have driven many of us to stretch our loans over much longer time periods: 69 months for new cars and 66 for used, both record highs. We're holding on to our ever-aging cars, hoping against hope to avert a major car repair. A transmission job. Or, worse, a blown engine.

If this wasn't bad enough news for hardworking Americans, the average price of gas is an even bigger kick to the family budget. And a crueler one, because it gnaws away at us one trip to the pump at a time.

used car lot
The average selling age of the used cars in 2018 spiked to six years old from four in just a decade—a 50 percent leap. Above, a view of a used car dealership in Ridgewood neighborhood of the Queens borough of New York City on January 19. Getty

The truth is, prices spiked at the pump more than $1 a gallon before Russia invaded Ukraine, though that won't be widely reported. A full tank that cost $40 just a year ago was setting back drivers $60 weeks ago, which is real money to ordinary Americans.

Those higher prices are a cruel, indirect tax that hits the middle, working-class and working-poor Americans the hardest. Indeed, anyone who hasn't felt the pinch of rising gas prices—or doesn't know anybody who has—is utterly disconnected to the life of ordinary working Americas.

Americans haven't experienced this kind of pain at the pump since the Obama administration, when prices spiked in similar ways. And for similar reasons: President Obama and Biden's energy policy teams shared a distaste for fossil fuels. And a fascination with shaping through incentives and regulations—policy carrots and sticks—a future without gas-powered vehicles, and one filled with electric and hybrid vehicles. High gas prices were a price we all had to pay for a green future.

So where, you might be wondering, does the money go to pay for a gallon of gas? What politicians won't tell you, but should, is that the biggest part of the costs is directly tied to the cost of the crude oil itself, according to the U.S. Energy Information Administration. Then there are the refining, marketing and distribution costs, which are 30 percent of the total cost.

The federal government doesn't lift a finger getting the product out of the ground and into a filling station near you. But that doesn't stop it from extracting a hefty cut: 18.4 cents per gallon, a vigorish that would make any bookie blush.

And that's not counting the state government's cut. California, Illinois and Pennsylvania are the top three gas gougers (66, 59 and 58 cents per gallon respectively), while Alaska, Missouri and Arizona take the smallest cut (14, 17 and 19 cents per gallon).

At the bottom of the food chain are the mostly mom-and-pop retailers who own and operate the pumps—nearly 97 percent of gas stations are independents. The markup on gas is 15 percent, but when rent, freight, labor and credit card fees are factored in, the retailer is left with a 2 cent per gallon profit. Thus, the reason for the coffee, snack and food options at most gas retailers.

Another largely ignored fact related to the oil business is this one: Cars account for only 44 percent of total U.S. oil consumption. Diesel fuel, which powers trucks, is a large percentage, and jet fuel is not far behind.

But oil is a component of many essential aspects of American life, from concrete to medical equipment to the clothing we buy, the baby seats and carriages we use and so much more. Even so-called green companies like the North Face use oil in almost all of their products, from their really fancy backpacks to their expensive jackets. They also rely on oil to get their customers to great locations around America to hike and ski. Presumably, their customers are not taking mass transit to get there.

To watch the most recent oil talk in the news, Ukraine is the sole cause of the gas price spike. You would also come to believe, if you listened to the mainstream media car and culture gurus, that electric vehicle demand is so strong, Americans will no longer need those dreaded fossil fuels to power their cars, trucks and SUVs.

As is so often the case with the media and cultural elites, they mistake what's happening in their siloed neighborhoods with what's happening across the country.

"Outside of a few major metropolitan areas, electric vehicles (EVs) aren't all that common in the U.S," the Pew Research Center reported in June 2021. "While their numbers have grown rapidly in absolute terms in recent years, that's from a relatively small base." The fact is, EVs may one day become the standard way Americans power our vehicles. But we're a long way from happening.

If Americans only knew that our government was sending wealthy residents in major cities like San Francisco and Los Angeles a tax credit of $7,500 for the purchase of a new Tesla or otherwise expensive EV as thanks for being good environmental citizens, while offering nothing—nada, zip, zero—to the millions of Americans struggling to meet their monthly used car payments—they wouldn't be very pleased. It should be called a wealth transfer from the working and middle class to the wealthy.

The cultural and political elites aren't just divorced from the lives of ordinary Americans: They're divorced from reality itself.

In his ongoing fight over how and where Americans choose to live, the escalating price of cars and gas may be the biggest opening for savvy Republican and moderate Democrat politicians. It's the kind of issue that can turn an electorate out in an off-year election, and send politicians in Washington, D.C.—which has a great subway system—packing for home.

Where they will desperately need their cars. And low gas prices to fill them up, just like the rest of us.