Gas in the U.S. is Cheap

If you ask the average American what they think of current gas prices, they would probably tell you that they think $3 per gallon is too high. If you ask me, I think that Americans are spoiled and they don’t realize how much cheaper gas is here compared to the rest of the world. Not only is the absolute price of gas cheaper in the U.S. than anywhere else, but with one of the highest per capita GDP in the world (ranked 4th in 2006 according to the International Monetary Fund) it is even cheaper in relative terms. Here is the average end-use price per liter for January 2008 in several nations:

France $1.988
Germany $2.061
Italy $1.961
Spain $1.568
UK $2.037
Japan $1.427
Canada $1.050
USA $0.809

Source: End-User Petroleum Product Prices and Average Crude Oil Import Costs report from the International Energy Agency

By comparison, the average price of fuel in the U.S. for January of 2008 was $3.06 per gallon, but in Germany it was $7.80 per gallon! The UK isn’t that much better at $7.71 per gallon. Even our neighbors to the north (Canada) are paying nearly $4 per gallon ($3.97 to be more precise) so I think those of us in the USA really have very little to complain about.

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    • jimhunter67

      why do we have to pay the highest price for petrol or deisel in the world?? why cant it go back to about 84.9p per liter like it was a few years ago !!!!

    • CHESSNOID

      You're right, I was talking gross figures and didn't consider taxes. To be honest, the distance and mileage example I wrote was fabricated to try to provide some reasonable guess as to what a typical commute may be like. I did try to find some hard numbers, but didn't have much luck. Someone with a long commute such as yourself certainly has good reason to complain. I hope with your long commute you're getting better than 20 MPG though. Thanks very much for your well-thought comment. I wish I'd receive responses like yours more often.

    • per litre.

    • Hi WealthBoy,

      I agree gas is relatively cheaper than the countries you mention, but that doesn't help the average American when it comes to their budget. It is probably easier for most of us to compare what we were paying for gas per gallon from last year to this year. I live in California and most people I know commute great distances to get to work and most put more than double the miles you mentioned in your example above.

      Even with household income increasing to $5,792, you must also take into consideration that is a gross figure and doesn't include federal and state government taxes that are automatically withheld by most employers. This is usually 25-35% of that amount depending on how much you make.

      I think what makes most Americans complain is that gas has tripled in the last 6 years or so, but Exxon and other American oil companies have made the most Net Profit in history. We just know that oil companies are gouging us at the pumps, for the sake of their own pocket. I don't know how much gas they sold in those record profit quarters, but if I did I would take that amount and divide it by the profit they made, so we could see how much of a markup they put on it. If Exxon sold 40 billion gallons of oil last quarter and made a $40 billion dollar profit, then that would mean they made a dollar profit per gallon.

      Great post Wealthboy.

      Cheers!

    • Fuel prices may have tripled in six years, but median household income in the U.S. has also increased by $5,792 from 2002 to 2006 (I don't think the figures for 2007 are available yet). Let's say that in 2006 you drove 2,000 miles a month (household of 2 cars driving 1,000 miles a month each) and you get 20 miles to the gallon. That means in 2002 at $1.10 a gallon you would have spent $110 a month on 100 gallons, or $1,320 a year on 1,200 gallons. With a $2 increase, in 2008 (assuming the same milage and MPG) you will spend $2,640 more than in 2002. With a household income increase of $5,792 (and that's 2006, it is very likely 2007 was even higher), it is more than enough to cover the increasing cost of fuel. I still think we have very little to complain about.

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