February 22, 2008 Comments

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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    • Viewing 20 Comments

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      Your title is accurate but misleading because failed to mention the real reason for the higher price of gasoline in the other countries is because of the much higher goverment tax placed on it.
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      I agree that other countries do place higher taxes on fuel. However, even excluding taxes it is still slightly cheaper here than in Cananda and the UK. Did you view the entire IEA report? Here are the price per liter figures excluding taxes:
      <table>
      <tr><td>France</td><td>$0.777</td></tr>
      <tr><td>Germany</td><td>$0.768</td></tr>
      <tr><td>Italy</td><td>$0.805</td></tr>
      <tr><td>Spain</td><td>$0.769</td></tr>
      <tr><td>UK</td><td>$0.741</td></tr>
      <tr><td>Japan</td><td>$0.861</td></tr>
      <tr><td>Canada</td><td>$0.741</td></tr>
      <tr><td>USA</td><td>$0.704</td></tr>
      </table>
      That comes to $2.66 per gallon in the USA vs. $2.80 in Canada and the UK (the next-cheapest countries).
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      Also you fail to take into account transportation infrastructure in each country. The United States has a "Car" economy. Most European countries has much better developed mass transit systems and systems in place to make it much easier to survive without a car. The US keeps prices low on fuel because here, a car is the only way to get around.
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      If you ask me, mass transit in other nations isn't all that cheap. Take a look at fares for the Tube in London, U.K.. The cheapest monthly pass is £93.00 which comes to $180.86 per month in USD. That only covers two zones, which won't get you to the suburbs of London (it covers a distance with a radius of about 7 miles). Nonetheless, at $3.06 a gallon, $180.86 per month will buy you 59.10 gallons of fuel. The combined car and truck Corporate Average Fuel Economy (CAFE) for 2008 is 22.5 MPG. With 59.10 gallons of fuel and 22.5 MPG, that would allow you travel 1,329.75 miles per month. So on average, the price of gas in the US is enough to commute 33.2 miles a day. I still say that relatively speaking, gas here is cheap.
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      How about gas prices in places like Venezuela, Nigeria, Egypt, Kuwait and Puerto Rico? When you look at the spectrum of retail prices, the US seems to fall pretty close to the middle. (Venezuela has impressive subsidies. The oft repeated line is that in Venezuela, fuel is cheaper than water.)
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      Why do you only list the expensive countries?
      This gives the false impression about relative gas prices.
      Gas in the US IS expensive, and is only less expensive than the exorbitant prices charged in your examples.

      In Venezuela, the gasoline was selling for 13 cents!! a gallon, earlier this year. I know this for a fact since I paid to fill my cabbie's gas tank, laughing about it as I handed over my money. (I even took a photo of the pump price).

      Before the subsidies were taken off, it was 3 (three) cents, per gallon. At 11 to 15 cents (depending on grade), the Venezuela oil company is still making a profit.

      Exxon has reported the highest profits of any corporation in human history for the last two consecutive quarters. Where did those profits come from, if not by raising prices?
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      I agree with Seth. Even if mass transit isn't as expensive as I've heard, you really have to look at the demands of the country. The average person in European countries does not go outside their 2500 sq. ft. home to their two car garage and drive to work. They leave their flat and bike there. They don't have a Hummer, they have a Smart car because it not only is fuel-efficient, but that it can travel down the narrow roads that were horse paths hundreds of years ago.

      It's possible for the other countries to charge more without having a large impact on their economy. If gas in the US went up to where it is in France, you would see a broad scale panic. Everyone would go to their employers the next day and ask for raises, which would cause inflation to run wild.

      You'll note that the only other "driving country" on the list is Canada which isn't that much more expensive than our gas is.
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      I do agree that Canada probably provides the best comparison, as they do tend to have similar driving habits. However, gas in Canada is almost 30% more than here. You don't think that at $4 a gallon gas in Canada isn't that much more expensive? You can argue that the pretax prices are about the same, but consumers are concerned about the bottom line regardless of the taxes and duties.

      Anyone that lives near the border of two jurisdictions that have different sales tax rates is more likely to make purchases in the cheaper of the two. For instance, in Georgia gas is about 15 cents cheaper than Florida because Georgia receives revenue from state income tax. Florida has no state income tax, and therefore has a higher gas tax than Georgia. I have a friend that lives in southern Georgia and commutes to Jacksonville, Florida. Where do you think he buys his gas?
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      I listed only "the expensive countries" because the overall economies are more comparable. Gas may only cost 13 cents in Venezuela, but do you know how much a car is? In 2005, a Mazda Allegro (same as the Mazda 323 here) cost around $16,000 USD. $16,000 may not sound like a lot, but the per capita GDP in the US is 5.77 times that of Venezuela. Would you pay $92,450 for a Mazda 323? Venezuela is a very poor comparison because of the huge disparity in incomes. Gas may be a lot cheaper there, but you'd have to make a ton of money to be able to afford the car.
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      Gas should be more expensive here to encourage people to buy smaller more fuel efficient cars...or just to actually give them something to complain about. You cannot drive a big suv AND complain about gas prices, it makes no sense.
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      Its $1.25 in India!
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      Per litre, I believe. I think it's $4.84 per gallon.
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      In Iceland the price is:
      $2.333 a liter
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      It's important to realize that gas prices have risen very, very quickly. The price to fill up a tank was about the same throughout the 90's. In 2002, a gallon of gas cost $1.10....now it's over $3!

      It doesn't matter what country you reside. When transportation costs triple in 6 years, it's okay to complain.
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      Canada and the U.S. comprise a gigantic continent that we like to .
      call "The Americas". We are a "car economy" as was commented earlier. Nearly all
      of our personal transportation and logistics infrastructure is focused on
      getting people and resources to and from very distant places. Our
      population lives in eleven large provinces and territories. A driver on the
      east coast will spend a week on the road to get to the west coast. There are
      three open coasts and the U.S. border.
      There is no country that compares for distance of communities.

      Unfortunately, there are a lot of inefficient means being used to move our
      people and goods. The trains do move a lot of freight, especially from the
      coasts to the heavily populated south center of the country. The trucks fill the
      highways and choke the cities.

      Personal transportation is a large issue. Mass transit in cities is still an
      evolving concept. Trains that used to move people, from the beginning of
      Canada's inception, no longer connect to tracks in many communities. The greater
      number of rural communities do not have any kind of train service or mass
      transit besides infrequent
      inter-community buses. Unfortunately, the personal car, for a large number of
      people, is the only real choice that provides transport to work and to home.

      Canadians well understand the cost of fuel. Fuel production is an important part
      of our economy. Fuel use supports life in a harsh geography. Here we use fossil
      fuels to heat our cold winter homes. Here we cook and eat using every manner of
      fuel taken from our great foundation of mineral resources. Here we make long
      commutes, and pay well for it.

      Canadians are also important contributors to the entire system of fuel
      technology. Engineering in harsh environment encourages us to make good
      technology decisions. The engineering trickles down to every business
      enterprise, institution, home and garage. The solutions to answering our great
      need to spend resources is met with research, development, and application in
      our daily lives.

      And we are "spoiled". We are rich with resources. We are comfortable in our
      economy. We are adaptive folks without any doubt. We are spoiled with choices.

      And this is where the optimism lays. Canadians are known to be among the most
      frugal people in the world. We like to save and invest money. We don't really
      like to spend it. This is the popular impetus to answer energy problems of today
      and tomorrow.

      Living in a big country on a large continent, and bearing the load of moving
      ourselves and goods to and from vast distances is the test of fuel consumption.

      When you are presenting your numbers, please consider limiting your comparative
      regions to the largest ones on Earth. Then the issue of need and use will become
      more clear to us all.
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      exon makes 40.000.000.000.00 profit for the year cut that buy 2 thirds and they still profit gas would be $1.75 a gallon . but the greed disgised buy the ecuse of the ever increcing need to satsf'y the greed of the stock holders witch is mostly the people running the compeny and there frinds ie,goverment lacky's and fourin nationals screw the avarig americans
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      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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      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!
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      per litre.
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      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.

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