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1 Why gas in the US is so cheap on Sun May 18, 2008 7:16 am

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I found this article on Yahoo and post it as some food for thought.




Why Gas in the U.S. Is So Cheap
by Steve Hargreaves
Friday, May 2, 2008

Relatively low taxes have kept pump prices far below most other developed nations, which some say is precisely why the current runup is so painful.

Despite daily headlines bemoaning record gas prices, the U.S. is actually one of the cheaper places to fill up in the world.

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.

The difference is staggering. As of late March, U.S. gas prices averaged $3.45 a gallon. That compares to over $8 a gallon across much of Europe.

The U.S. has always fought to keep gas prices low, and the current debate among presidential candidates on how to keep them that way has been fierce.


But those cheap gas prices - which Americans have gotten used to - mean they feel price spikes like the ones we're experiencing now more acutely than citizens from other nations which have had historically more expensive fuel.

Cheap gas prices have also lulled Americans into a cycle of buying bigger cars and bigger houses further away from their work - leaving them more exposed to rising prices, some experts say.

Price comparisons are not all created equal. Comparing gas prices across nations is always difficult. For starters, the AIRINC numbers don't take into account different salaries in different countries, or the different exchange rates. The dollar has lost considerable ground to the euro recently. Because oil is priced in dollars, rising oil prices aren't as hard on people paying with currencies which are stronger than the dollar, as they can essentially buy more oil with their money as the dollar falls in value.

And then there's the varying distances people drive, the public transportation options available, and the different services people get in exchange for high gas prices. For example, Europe's stronger social safety net, including cheaper health care and higher education, is paid for partly through gas taxes.

Gas price: It's all about government policy. Gasoline costs roughly the same to make no matter where in the world it's produced, according to John Felmy, chief economist for the American Petroleum Institute. The difference in retail costs, he said, is that some governments subsidize gas while others tax it heavily.

Bogged Down
Most expensive places to buy gas
Rank Country Price/gal
1. Bosnia-Herzegovina $10.86
2. Eritrea $9.58
3. Norway $8.73
4. United Kingdom $8.38
5. Netherlands $8.37
6. Monaco $8.31
7. Iceland $8.28
8. Belgium $8.22
9. France $8.07
10. Germany $7.86
111. United States $3.45
Source: AIRINC

In many oil producing nations gas is absurdly cheap. In Venezuela it's 12 cents a gallon. In Saudi Arabia it's 45.

The governments there forego the money from selling that oil on the open market - instead using the money to make their people happy and encourage their nations' development.

Subsidies, many analysts say, are encouraging rampant demand in these countries, pushing up the price of oil worldwide.

In the U.S., the federal tax on gas is about 18 cents a gallon, pretty low by international standards.

But those relatively low gas taxes make it hard now for Americans to deal with gas prices that have risen from around $1 to over $3 a gallon in the last seven years.

"Everybody pays more, but the U.S. pays more in absolute terms," said Lee Shipper, a visiting scholar at the University of California Berkeley's Transportation Center. If you're already paying $4 in taxes, said Schipper, then an extra $2 a gallon isn't that big of a deal.

Revenues from Europe's high gas taxes are used to fund a variety of things. One thing they have built is better public transportation, said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.

They gave people an alternative to driving, something we don't have in North America," said Tertzakian.

Low fuel taxes and prices sprung out of a national love for mobility going back generations, said Robert Lang, director of the urban planning think tank Metropolitan Institute at Virginia Tech.

Cruisin'
Where gasoline is cheapest
Rank Country Price/gal
1. Venezuela 12 cents
2. Iran 40 cents
3. Saudi Arabia 45 cents
4. Libya 50 cents
5. Swaziland 54 cents
6. Qatar 73 cents
7. Bahrain 81 cents
8. Egypt 89 cents
9. Kuwait 90 cents
10. Seychelles 98 cents
45. United States $3.45
155 countries surveyed between March 17 and April 1, 2008. Prices not adjusted for cost of living or exchange rates.
Source: AIRINC

In fact, the U.S. could not have had the western expansion it did without the cheap mobility railroads and horse carriages afforded long before it became an auto-obsessed culture, said Lang.

"You couldn't have Manifest Destiny unless you could move," he said.

The automobile, and its promise of personal mobility, only deepened the nation's love affair with travel.

"Nobody sang 'She'll have fun fun fun until her daddy takes the tokens away,'" said Lang. 'It's totally romanticized."

Gas consumption Europe vs. U.S. There is some evidence Europe's high gas taxes have capped its oil consumption.

Oil use in the United Kingdom has basically stayed flat from 1980 to now, while in France it's dropped 17%, according to figures from the Energy Information Administration.

In the U.S., meanwhile, oil use is up 21% over the same period, although the country has added more people and seen its economy grow slightly faster.

Americans have taken advantage of cheap gas prices to do other things - like buy bigger cars and bigger houses further away from city centers, said Schipper.

On a per capita basis, Americans use three times more oil than Europeans, he said. That means Americans are more exposed to rising gas prices than their counterparts across the Atlantic.

"Five-thousand square feet in the suburbs, that's much rarer in Europe," said Schipper, referring to big homes. "We dug our hole."

2 Re: Why gas in the US is so cheap on Sun May 18, 2008 10:49 am

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I buy this info 100%. There will come a day (tommorrow?) when we Americans will have to re-engineer our transportation systems. I love my little MX-5. I have FUN with it and it gets 25 miles per gallon. Before that, an HHR (25 mpg) and before that, a Jeep Liberty (17 mpg). That Jeep was my last gas hog. I will never buy one again. Deciding to use alternative methods of transportation will not be a salutory thing to do, it will be necessary for our economic survival. One of the greatest failings of this administration has been the withdrawal from the commitment to oil conservation. Added to that is the Bush admin's insistence on more drilling as a viable remedy to our overdependence on oil. I wonder how long it will take for it to sink in here that the party is over. Even if we open up every possible oil field, by the time that oil is refined, years from now, we will have outgrown the supply. We CANNOT GROW MORE OIL. Ethanol production is already affecting the overall food supply worldwide. Electrtic cars use MORE oil, not less, as long as the electric energy is oil produced; and it is. I hate big government programs, but rightly or wrongly, I see a national energy crises developing that calls for a massive energy program, and I just don't see any leadership. I hope I am just being dumb.

3 Re: Why gas in the US is so cheap on Sun May 18, 2008 3:50 pm

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Ethanol from sweet sorghum sap has been the research focus as a fuel source.

There are several types of sorghum, but the researchers apparently consider "sweet sorghum" as having the greatest potential for success. The USAD along with Texas A & M University will be sponsoring a conference on its use as a biofuel in Houston in August 2008.

Texas A&M University. coals.tamu.edu

http://www.livescience.com/environment/080514-ap-biofuel-sorghum.html








4 Re: Why gas in the US is so cheap on Sun May 18, 2008 6:41 pm

rosco 357


Veteran
i agree with marc, that Mays post on oil is a very good post and i agree.
i dont see how the price of big suvs dont tank, and sell slow, but there will always be ppl that can afford them and motor homes, ppl are changing ways they travel, but are very limited, my nephew just got a new 5th wheel camper trailor , but rather than pull it around as he has a ford diesel 250 . he pulled it to the gulf and keeps it in storage there , and calls ahead and the campground, pull is out and places it in a campsight, and all this is cheep, i think like 30 bucks a month for storage, plus he does not need to go when he works weekends, his wife and my sister can go , and its already in place, his friend does different he pulls his, and i think a trip to the gulf and back was like 300 bucks in diesel, which is much higher now than gas, they have to have diesel for the pulling power, as they pull heavy equipment in their work . like marc, i am satisfied, with what i bought, a nissan versa, 28 to 35 mpg , i get about 31 driving to work most is freeway but not all, sure i could have got one with a bit more millage but this one is a big bigger, and i like much more than say a honda fit, plus i have a timing chain,and gear and not a timing belt that is expensive to change out like on 65 ,000 miles,, ok im rambling, i work with ppl that drive pick up trucks, from long way, over 100 miles round trip, mine is like 58 miles roung trip my pickup gets 15 mpg, so i drive it limited, but need it to haul things ,, like a lake project , lumbar etc, but i see things changing and ppl loosing jobs that work in factories that have things like motor home, campers etc. the way ppl live here i dont see public transpotation as workable.some car pool . but i have no one where i live, but i would not anyway, i want the freedom to leave work anytime i choose, or work over, well again, good article Mays.. take care

5 Re: Why gas in the US is so cheap on Sun May 18, 2008 6:59 pm

gypsy


Moderator
it is amazing that we americans gripe about gas prices,,but, when i am out, which i limit my trips ,and try to do all errands at once~~ the mall is full of people ,the resturants are full ,and traffic is horrendous?? Strange!! very strange!
as Rosco says, take care!!

6 Re: Why gas in the US is so cheap on Sun May 18, 2008 7:36 pm

rosco 357


Veteran
gypsy wrote:it is amazing that we americans gripe about gas prices,,but, when i am out, which i limit my trips ,and try to do all errands at once~~ the mall is full of people ,the resturants are full ,and traffic is horrendous?? Strange!! very strange!
as Rosco says, take care!!

i agree totally. still half the cars atleast on the crowded freeway, are gas gussslers, and places seem to be covered up with shopers, . i have heard and i forgot where, starbucks will be closeing some stores, and i may have read it here or heard it at work, as ppl find ways to cut some cost, i dont drink coffee, one cup in the morning at work as work furnishes coffee for us free, but if not for that i would not.. what i should have said is i have never been in starbucks, but i have heard the coffee is expensive, but i dont really know. i dont understand if it is expensive , anyone drink it here???? is it that much better to warant the cost,, ??? and what is the cost??? anyway, the stores closing is a way to cut cost, thank gosh i dont smoke , half the ppl at work smoke and cigs are expensive, ppl at work are already talking about working longer hours per day and come in less days to save gas, u can almost name ur hours at work as long as u cover ur shift, take care

7 Re: Why gas in the US is so cheap on Sun May 18, 2008 9:17 pm

gypsy


Moderator
Ilove starbucks coffee~ but I don't have to get in my car! to get me some LOL the good old internet~ also, consider it a treat, like going to dairy Queen(car /gas involved)for a sundae~~ yehaw~

8 Re: Why gas in the US is so cheap on Mon May 19, 2008 5:01 am

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I, rather perversely, am pleased to see Starbucks downsizing. I don't drink coffee either, and I saw their operation as elitest. The very name "latte" sounds 'mo to me, and thus my point: How can anyone say we have advanced as a society when we are fatter, our kids are less educated, fashion statements like Edwards can actually have any political influence, and we are STILL buying 5000# vehicles to tour the malls and buy MORE crap. I see the war in Iraq as another example. Very few agree with me, but I thought the invasion of Iraq was a good idea. BUT, this war was initiated (regardless of what the gov. says) to keep Saddam from monopolizing the oil fields in the mid-east. Necessary and do-able. But Bush executed his plan so poorly, it would have been better not to have invaded at all. Yep, instead of tutoring our children, finding ways to conserve fuel, and demanding competence from our government agencies, we wander around in malls looking for things to waste money on. Just an opinion, but I think our wasteful days are over. If oil is valuable enough to kill for, why isn't the government vigorously supporting conservation policies? Why do so many call for more drilling? It's like taking money out of your life's savings to buy more steaks, booze, and cigarettes.

9 Re: Why gas in the US is so cheap on Mon May 19, 2008 8:37 pm

rosco 357


Veteran
wow this is a few years ago, a coworker had a friend that somehow knew alot about stocks, he told my coworker to go NOW and buy starbuck , remember this was years ago, just wonder now how its going, well my coworker did not take his advice, but told him later to let him know if a good one comes along, well krispy kreme donuts i think were started in the south, he called my friend at work adn told him to go buy krispy kreme donut stock that it was fixing to expand into california. i do remember this, long lines in cali they showed, and even J leno talking about Krispy Kreme, it brings back memories, when in the 4th adn 5th grade we sold boxes of krispy kreme donuts to make money for our class, they were only 50 cents a dozen in a box,, man am i old lol,,,

10 Re: Why gas in the US is so cheap on Thu Jun 05, 2008 3:38 pm

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Gasoline is subsidized in the United States through tax breaks the US gives the Oil Companies, in particular the Oil Depletion Allowance. The economic effect of this is to retard the development of alternative energy sources. The other thing that retards the development of alternative energy sources is that the government grants to develop the alternative sources mostly go to the big oil companies.

11 Re: Why gas in the US is so cheap on Thu Jun 05, 2008 4:59 pm

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X-22 wrote:Gasoline is subsidized in the United States through tax breaks the US gives the Oil Companies, in particular the Oil Depletion Allowance. The economic effect of this is to retard the development of alternative energy sources. The other thing that retards the development of alternative energy sources is that the government grants to develop the alternative sources mostly go to the big oil companies.
Hi, X-22, long time, no see! I've been saying similar things for some time. The overall 8%-10% profit that the oil co's earn isn't outta line, but...outta one side of their mouth they say "the greenies are preventing us from expanding exploration/drilling" and outta the other side, they're saying "we have a diminishing resource and should be protected from the effects of a diminishing supply of crude". It's like selling a cake while you're eating it, raising the price as it gets smaller with each bite, and also having the government pay you not to bake another one. Nice racket.

12 Re: Why gas in the US is so cheap on Thu Jun 05, 2008 8:23 pm

rosco 357


Veteran
i think i heard on tv, i was in another room, i forget if it was the oil ppl. before a congress committee, having oil ppl on the hot seat. like marc said this oil executive, said they are making 8 and half percent profit, i do believe that was said, the reason the dollar amount is high is they are selling lots of oil. is what he said,
they also said yahoo and google, make like 30 to 40 percent profit, if thats true i dont know , he said it . and that no one was jumping on them, but it was said, stock owners in the oil companies expect a decent percentage
profit, it was also said , im not sure it it was there or not. but who is some of the ppl that own stock in oil companies, well its us, most all retirement plans that invest the money like 401s and money market, and iras, most all those part of the investment for the retirement plan is in oil stock , as most retirement plans own lots of stock in many companies so oil would be one on the list, i know i have a list, but i never take time to look.. and i know 401 have so many ways to chose what u put it in, i figure some do not invest in oil companies, but most probably do to maybe a small amount, just food for thought, .. did anyone see on NBC nitely news with brian williams, the car that got 300 miles to a gallon, mostly was electric i think, it was real streamline and 3 wheel, and would hit 90 mph. it looked like the front of a small plane, i for the first time thing ppl now will get serious on cars that be very much more fuel effecient, even car companies because they will sell now. and car sales are droping . i think i heard for the first time in a ton of years the ford F-150 was not the top selling truck , i think i heard that, take care,

13 Re: Why gas in the US is so cheap on Fri Jun 06, 2008 6:15 am

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Oil prices hold above $128 a barrel in Asia after rising more than $5 on weaker dollar


-- Oil held near $128 a barrel Friday in Asia after rising more than $5 overnight as the dollar swooned against the euro in response to comments by the head of the European Central Bank.


The dramatic reversal in what had been a weakening market came after ECB President Jean-Claude Trichet suggested the bank could raise interest rates and the euro climbed against the dollar. When interest rates rise in Europe, or fall in the U.S., the dollar tends to weaken against the euro. Many investors tend to buy commodities such as oil as a hedge against inflation when the dollar is falling.

Also, a weaker greenback makes oil less expensive to investors dealing in other currencies, and analysts believe the dollar's protracted decline has been a major reason why oil prices have nearly doubled in the past year.

Meanwhile, the dollar held relatively steady against the yen, changing hands near 106 yen in Tokyo's currency market. The euro was trading at levels near $1.56 on Trichet's comments.

Trichet spoke after the bank left a key interest rate unchanged amid concerns about inflation. While Trichet said a change in rates was not a certainty, he said some of the bank's governors favor an increase.

"Oil, which was very weak, rallied on those comments," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "They're out of step with the U.S., which is weakening the dollar."

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