Thursday, March 26, 2009

Gas Survey


What is the most you would pay for gas? For instance, what if gas prices rose to $5, to $7, or even $10+ a gallon? Would you still use your car as much as you do now or would you look for any other alternative possible for transportation?

I’ve always wondered what would be the breaking point for Americans to start abandoning their cars. No, I am not wishing this or advocating this on our country. However, I do want entertain this idea for a variety of reasons.

For example, it is interesting to note that the US finds its ranking in the least expensive bracket for their average of gas prices. “Out of 155 countries surveyed, U.S. gas prices were the 45th cheapest, according to a recent study from AIRINC, a research firm that tracks cost of living data- CNN.” Nonetheless, the US is ranked number 1 in oil consumption, consuming 20,680,000 barrels of oil a day (Nationmaster-2007 statistics).

These shocking numbers drive one to seek for more answers. The main one being, “what is reasoning behind the disparity of gas prices from country to country? Specifically, why does a country such as Venezuela charge 12 cents for a gallon opposed to the Netherlands which charges up to an all time high of $10 a gallon?

Differing gasoline prices are a reflection crude oil prices, processing and distribution costs, local demand, the strength of local currencies, local taxation, and the availability of local sources of gasoline (supply)-Wikipedia. Particularly, the variation in prices often comes from whether or not gas is taxed or subsidized by ones government.

Typically, gas is heavily taxed in places where it is less abundant or nonexistent as a natural resource. Furthermore, heavy gas taxes are also frequently levied to support strong social programs such as those which are plentiful among many nations of throughout the European Union. For instance, unlike the US many of these countries use funds acquired from gas taxes to help finance education and health care for their citizens.

On the other hand, countries which subsidize gas are usually those which have a large surplus due to it being among some of their primary resources. Oil rich countries such as Venezuela, Iran, Saudi Arabia, Indonesia, Egypt, Malaysia, and Mexico are among the few which subsidize the price of gasoline. Their cheap prices are a reflection of this. However, subsidizing gas has often been argued that it cripples its citizens and nevertheless, is not helping the environment in any fashion. Venezuela for example, is facing a rising cost in its national debt due to the money it loses on subsidizing its gas. “Venezuela is paying a price for cheap gasoline. State oil company Petróleos de Venezuela is footing an $11 billion a year bill for underwriting and subsidizing the fuel. That's nearly double its 2007 net income of $6.27 billion-Business Week.” Furthermore, now that Venezuela is moving toward socialism, how else are they going to afford any social programs to help their citizens? Many think that they should start subsidizing less and start exporting more.

Still, the question remains. How is the US getting away with such low gasoline prices? No, they don’t have national health care but this new administration wants one. They also don’t pay as much as Europe for their education, but still are continuing to cut it around the country. Even though the US has some oil reserves of its own they are starting to import it more and more as time goes by. Finally and most importantly, the US is largest consumer of oil in the world. So what gives?

One thing is certain; these prices are going to change in the future, whether you like it not. As the number one consumer of fuel, the US cannot remain out of balance with the rest of the world for very long. Besides, this amount of consumption is no good for the environment. Eventually, the cheap price we pay for is going to hurt us in the long run.

For the moment, we are already starting to see some of its effects. For one, with cheap gas prices automakers have no motivation to producing anything that is fuel efficient or environmentally friendly. Consumers also have no motivation to stay away from big hunky gas chugging polluting SUVs and trucks. March’s Motor Trend Magazine’s article describes this trend in its article, Prius or Pickups. They say that with gas prices down consumers are going back in full force to purchasing SUVs again.

So, what do you think? My last post described how a strong national policy with emission standards is one way of starting a change toward the development and purchasing of better cars. Is raising gas taxes or Europeanizing the US another solution? Proponents such as Democrats Al Gore and House Representative John Dingell suggest that higher gas taxes should be enforced through a carbon tax:

“A carbon tax is a form of pollution tax. It levies a fee on the production, distribution or use of fossil fuels based on how much carbon their combustion emits. The government sets a price per ton on carbon, then translates it into a tax on electricity, natural gas or oil. Because the tax makes using dirty fuels more expensive, it encourages utilities, businesses and individuals to reduce consumption and increase energy efficiency. Carbon tax also makes alternative energy more cost-competitive with cheaper, polluting fuels like coal, natural gas and oil- Howstuffworks.”

This wouldn’t raise gas prices to a European standard overnight. According to Dingell’s plan, it would be progressive, slowly raising taxes in little increments annually. Another solution that is favored by politicians is a cap and trade scheme:

“Cap-and-trade schemes are the most popular way to regulate carbon dioxide (CO2) and other emissions. The scheme's governing body begins by setting a cap on allowable emissions. It then distributes or auctions off emissions allowances that total the cap. Member firms that do not have enough allowances to cover their emissions must either make reductions or buy another firm's spare credits. Members with extra allowances can sell them or bank them for future use. Cap-and-trade schemes can be either mandatory or voluntary- Howstuffworks.”

Again, what do you think? Are either of these resolutions viable for you and the automotive industry? Will it be what the US needs to push itself toward the next generation of technology and a clean environment? Or do you have another answer? Unlike many of my views on US policy and the automotive industry I cannot make up my mind on this one. For the moment, I am enjoying gas prices too much at what they are right now to be able decide the next move on this one. I need your help, because I know sooner or later this way of living will not last.

US. Gas Prices Vs. Europe



US. Gas Prices and Tax Differentials Vs. the World (Click to enlarge)



Wikipedia
Numbers:

Country/Territory
US$/gal

Venezuela (Caracas)
0.19
Turkmenistan
0.3
Nigeria (Lagos)
0.38
Iran
0.42
Saudi Arabia (Riyadh)
0.45
Kuwait (Kuwait City)
0.79
Qatar (Doha)
0.83
Bahrain (Manama)
1.02
Egypt (Cairo)
1.21
UAE
1.4
Brunei
1.48
Trinidad and Tobago
1.82
Mexico (Mexico City)
2.35
Indonesia
2.46
North Korea
2.69
Malaysia
3.18
China
3.94
Russia (Moscow)
3.97
Pakistan
4.01
Colombia
4.05
Honduras
4.05
United States
4.06
Thailand
4.58
Philippines (Cebu)
4.62
South Africa
4.66
Chile
4.81
Ukraine
5.03
India (NOIDA)
5.15
Canada
5.49
Sri Lanka
5.53
Australia
5.6
Dominican Republic
5.72
Brazil (São Paulo)
6.02
Japan
6.06
Singapore
6.06
Uruguay (Montevideo)
6.06
New Zealand
6.13
Estonia
6.78
Romania (Bucharest)
7.0
Cyprus
7.08
Slovenia
7.08
Switzerland (Zurich)
7.12
Croatia
7.38
Greece
7.38
Guatemala
7.38
South Korea
7.38
Hungary
7.51
Poland (Krakow)
7.8
Israel
7.95
France
8.06
Spain (Madrid)
8.1
Hong Kong
8.33
Monaco
8.33
Belgium (Brussels)
8.44
Iceland
8.52
Sweden
8.71
United Kingdom
8.74
Italy
8.78
Portugal
8.78
Finland
8.9
Germany
9.2
Denmark (Copenhagen)
9.31
Eritrea
9.58
Netherlands
10.11
Turkey
10.14
Norway (Oslo)
10.37
Sierra Leone
18.43



For a very comprehensive look at world numbers check this out Also look at each map to see which countries subsidize or tax gasoline

(Note to convert to gallon price- Multiply liter price by .03785412)

4 comments:

  1. I find it interesting that were 45th and yet people believe we're still paying too much at these prices-when you take a look at how other countries utilize their supply to reap the most advantages, the US looks quite benign. Thank you for posting the stats, one you see them they are alarming, but most do not go to the trouble to search for them.

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  2. In considering whether or not to tax gasoline with the intent to reduce usage, legislators may want to consider several factors. A thorough analysis would be required to cover most relevant factors, but I can tell you that each individual city's alternative modes of transport is an important issue to consider. It might be easy to avoid using a car in compactly designed cities with developed public transportation, such as New York or Paris. However, an exponential increase in gas prices may cripple some regional economies that have developed with the automobile in mind as the paradigm mode of transport, such as Los Angeles or Sacramento. Clearly, at European-level gas prices, Los Angeles would find itself in a crisis, as over 2/3 of the city's population relies on automotive transport.
    Just to say, what may work well for Europe may not necessarily work well for us, given our different circumstances.

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  3. I think it's good that someone finally put the gas pricing issue into perspective as Americans whine and moan about the fluctuating prices. However, even though the UK is averaging about $5 more expensive per gallon of gas than the USA, the UK economy and value of the pound is more stable than in the US. The USA might be finding its economic problems to increase as the $787 Billion Stimulus Bill tries to counteract the $10 Trillion national deficit. Many foresee the national debt rising 10% every year for the next 10 years. All I know now is that I will enjoy my Jeep off-road vehicle despite its fairly poor mileage.

    Great post though. I truly believe that more people should understand this argument as you have laid it out.

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  4. I'm so dependent on having my own car and working on my own schedule that I most probably will always be a slave to the pumps. Last summer when gas prices were reaching $4.50 I was working at the Pasadena Star-News. We published a piece about where to get gas for the cheapest price and the readers went crazy when the saw that a gas station in the city was selling unleaded for $3.99. It makes me laugh now that gas prices have gone "down". Also around that time I saw that Kuwait was selling under a dollar.. literally someone could buy a 2 liter bottle of Pepsi and it would cost more than a gallon of gas.

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