If misery likes company then US car drivers have a lot of companions around the world who are suffering from even higher prices at the pump. As you stare at that sticker price of $4 a gallon, it is probably best to be too young to remember that between 1990 and 1995 gasoline averaged around $1.22 a gallon. (Oh, happy days).
While many oil-rich developing countries such as Iran, Saudi Arabia, Egypt, Burma, Malaysia, Kuwait, India, China, Taiwan, South Korea, Brunei, and Nigeria subsidize gasoline prices so that its citizens pay as low as 19 cents a gallon (in Venezuela) or 38 cents a gallon (in Nigeria), most developed oil-hungry states don’t have it so good. If you think $4 a gallon is bad in the US, how about $5.60 in Australia, or $8.56 in the UK, or $11 in Norway. Oh, and did I mention the $18.43 price in Sierra Leone (OK, it’s a developing country recovering from the chaos of a civil war, so strike that).
And why are drivers in these countries suffering more at the pump? In a word, taxes. In the US gas taxes (both federal and state) are relatively low and devoted to offsetting macro-transportation costs such as road building and maintenance. However, in densely populated Europe the fuel tax is used both as a longstanding source of general revenue and as a means to discourage driving and decrease pollution (by encouraging use of the extensive public transportation systems).
The US Department of Energy breaks down the costs of gasoline sold in the US as:
Crude oil: 52%
Refining: 24%
Taxes: 15%
Distribution and Marketing: 9%
So the drastic ramping up of crude oil prices in recent months to more than $130-a-barrel today is the main component in the spike in the price drivers pay at the pump. And despite the fact that Big Oil companies (such as BP, Exxon Mobil, Royal Dutch Shell, Chevron and others) stand under suspicion of price gouging, market manipulation, and excessive profit-taking, in this hot political season before national elections, the fact is that distribution and marketing and refining costs are relatively restrained.
When executives from the above listed companies were summoned before the Senate Judiciary Committee last week to justify their “windfall profits” the oil company executives contended that their record profits last year were in line with other industries. Far from a windfall, oil and gas companies earned an average of 8.3 cents per dollar of sales, compared with 7.8 cents per dollar for the Dow Jones Industrial Average.
Until the crude oil futures markets see a better balance between supply (not enough oil) and demand (too much usage), crude oil prices will stay high.
So what should US drivers do this summer?
(a) Grin and bear it?
(b) Drive less?
(c) Think of Norway?
(d) All of the above?
The answer is (d).
Comments
Milt Shook Says:
May 31st, 2008 at 8:04 am
I really hate this sort of “analysis, because it’s simply not accurate. Norwegians are NOT paying $11 a gallon for gas. They’re paying about 7 euros. This is up from about 5.50 euros three years ago. That means they’re paying 32% more for gas in three years, while the price of our gas is up about 80%. In fact, if our gas price had only risen 32%, we’d be paying $2.75/gallon.
Of course, the mileage standard in Norway is also about 39 mpg, and they drive fewer miles than we do, on average. So, here’s the deal; feel sorry for yourself if you want, but Norwegians spend less on gas each year than we do, even with the higher price.
But they get paid in euros, and they pay for things in euros. Don’t try to feel good just because the dollar keeps dropping in value…
Joe Buttice Says:
May 31st, 2008 at 8:07 pm
I live in Chicago, where gas prices are at thier highest in the nation. Our great Sentor Mr. Dick Durbin and Governor Rod Blagojevich are on the T.V. pointing thier fingers at the oil companies for the high prices (which is true).
But, what both of them won’t tell you is that in Illinois the tax on gas is a percentage tax. Meaning that when the price of gas goes up, so does the percentage for the tax. Causing Chicago to have to highest average in the nation. Also causing us to pay an estimated 200 million extra dollars this year in gas tax.
So maybe instead of these two pointing thier fingers at the oil companies first, they should point the finger at themselves!
Ken Says:
June 1st, 2008 at 7:56 am
So much crap about gasoline prices!
It is possible to run a car on HHO gas…those run your car on water conversion kits actually work, you know.
Jeff Dorsch Says:
June 2nd, 2008 at 2:09 pm
I had no idea gasoline prices were so high in Norwegia.
Thea Says:
October 7th, 2008 at 1:53 pm
Milt Shook:
“But they get paid in euros, and they pay for things in euros.”
Uh? Since when was Norway ever a part of the EU? We get paid in NOK, and we pay with NOK - we do not use euros at all. The current gas price (per gallon) is 8$. In may, one liter in the US would cost 4,6 NOK - while one liter here costs 12-13 NOK. 6 NOK = 1 USD. 1 gallon = 3.79 liters.
Cmd -> calc -> have fun.
Gas makes up 3,5% of a household’s expenses. We use public transportation a lot, and some also ride their bicycles or walk to work.
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