Gas IS Cheap: It’s Official


As a Brit living in the USA I've always been amused by Americans complaining about gas (aka petrol) prices: they complained when it hit $2/gal and are complaining again now its $3/gal.

The US govt. has a great table that shows the US price compared to Europe, starting a few months after I got here and updated weekly. You can see that ten years ago the UK price was more than it is in the USA now.

The ratio has changed a bit: 10 years ago it was 2.5x cheaper here, now it is "only" 2.1x cheaper. Of course everyone pays basically the same for the crude oil, the price differential is due mostly to taxes. Weirdly federal tax on gas is charged not as a percentage (like sales tax is) but per gallon, so as the price of oil rises, the federal tax remains the same, further insulating Americans from the real price. So they can continue to enjoy their Hummers.

[In my own defence I have to point out that one of our SUVs is a hybrid]

Comments (9)

  1. Grant says:

    The price of oil/gas is not rising.  But the value of our fiat currency is falling.  Compare the price of oil/gas to that of gold or silver and there is a much different story to be told.

  2. mikeb says:

    While I understand that US consumers have paid less for fuel than other countries due to smaller taxes, I hardly think that that makes an argument that higher taxes are what should be paid.

    Generally, the lower taxes are, the better (in my opinion).  I don’t see a valid argument that higher costs for goods automatically justifies higher taxes for no other reason than ‘other things cost more’.  Higher taxes (in any terms – real or percentage) need to be justified based on what they procure.  Just because certain costs go up is not an automatic justification for taxes to go up.

    For example, sales taxes have gone up for me over the past few years (as a percentage). I’m not sure that I’ve seen the services I’ve recieved increase correspondingly.  In fact, I’ve been sent a flyer from my city saying that they have cut services as a justification for a proposed property tax increase.

    Maybe that justifies that a tax somewhere else has gone (or should go) down.

    On the other hand, given what the US is paying for oil protection (which is what I believe the Iraq War really is ultimately), there probably should be much higher taxes on oil to reflect the true cost.  

    That is a justification for higher taxes. Simply saying, "other people pay more in taxes for the same thing", is not.

  3. MarkI says:

    So "one of our SUVs is a hybrid" is a defence, is it? How many SUVs and the other vehicles do you have? How many do you need? 🙂

  4. ac says:

    If you factor in all the obvious things, it is quite clear that the price of oil is going up.

    So the solution is simply to get share in the oil companies and pay the gas with the profit..

  5. Andy-Pennell says:

    For more perspective e.g. why Europeans don’t mind paying serious taxes on gas, see Sunday’s NYTimes (online at http://www.nytimes.com/2006/05/07/weekinreview/07landler.html?_r=1&oref=slogin) – check the graphic for a world view. The only countries with cheaper gas than the US are govt. subsidized.

    Grant: the price of oil IS rising. Its >$70/barrel right now.

    MarkI: My wife and I are able to justify our vehicles. Obviously we can only drive a maximum of two simultaneously.

  6. cgreene says:

    Unfortunately, high gas prices are a self-inflicted wound for at least two reasons.  First, demand for crude across the globe is rising faster than supply.  We (the US) could increase our domestic supply – and displace the need for imports – if we would begin more drilling in Alaska and Gulf of Mexico.  Second, the various “boutique” blends of gas complicate the distribution.  Post-Katrina gas prices and current gas prices went down after the dozen+ environmental rules were suspended.

  7. Sebastian says:

    You are forgetting one important thing, which is "distance". Distance from and to work, school, shopping, etc. I was raised in Europe and going anywhere more then 50 miles was a major trip. In US there’s a lot of people that drive each way to work 50 miles every day.

  8. Andy-Pennell says:

    Sebastian: I don’t buy that entirely. I used to commute 60 miles each way in the UK, and petrol was my #1 expense (more than my mortgage). If I had been commuting into London I would have used the train instead. If an American chooses to commute that far by car they are free to, but shouldn’t do it in a Hummer, on their own, and then complain about how much gas is or how much they are using.

    Distance to shopping is a lot less in the USA (in the ‘burbs).

  9. Andy Pennell says:

    The table link needs updating, it is now http://www.eia.gov/…/gasolinewithtax.cfm

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