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US Gas Is Cheap Compared to Most

By Steve Hargreaves,

CNNMoney

Posted: 2008-07-31 09:58:36

NEW YORK (May 1) -- Despite daily headlines bemoaning record gas prices, the U.S. is actually one of the cheaper places to fill up in the world.

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Roberto Pfeil, AP

Most Expensive Countries
To Buy Gasoline

1 of 10

No. 10
Belgium: $8.22 per gallon

All prices for the 155 countries surveyed by research firm AIRINC between March 17 and April 1 have been converted to U.S. dollars per gallon.

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, $12.03 in Aruba and $18.42 in Sierra Leone.

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.

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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. Obviously, buying $8 worth of gas with a euro - currently valued at about $1.55 to the dollar - is much easier on the wallet than paying with dollars.

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.

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.

Photo Gallery

Gustavo Ferrari, AP

Cheapest Countries
To Buy Gasoline

1 of 10

No. 10
Kuwait: 90 cents

All prices for the 155 countries surveyed by research firm AIRINC between March 17 and April 1 have been converted to U.S. dollars per gallon.

Also See: Find Cheap Gas | Gas Station Secrets | Gas Hogs | Does Gas Go Bad?

"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.

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.

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Justin Sullivan, Getty Images

Top US Economic Worries

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About 44 percent of people who participated in a new survey by the Kaiser Family Foundation said that gas prices are a "serious problem." See other top economic concerns.

"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."

2008-05-01 10:58:07

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3431 comments

DNDNIEL 03:47:17 PM May 11 2008

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FIRST OF ALL, LETS TRY TAKING THE CURRENCY EXCHANGE INTO CONSIDERATION BEFORE WE TRY TO KEEP UP WITH THE REST OF THE WORLDS PUMP PRICES!!!!!!!!!!!

Leguenth 12:07:46 PM May 05 2008

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The BIBLE SAID '' Be shore your sin well fine you out.''

Kaydahl 09:08:39 AM May 05 2008

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TStew13131...XOM paid federal taxes of 49% last quarter. What's your rate?

Hendum 08:19:46 AM May 05 2008

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News from the oil industry,this is suppose to make me feel better?

RBurke3177 06:44:27 AM May 05 2008

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I don't feel any better about what we are paying.

TStew13131 11:51:04 PM May 04 2008

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Since Aug 07, when oil started to rise in price, gas prices were said on numerous occasions to be going up because of all kinds of problems. Rebels in Nigeria, storms in Mexico, unprecedented maintenance issues, fires, refineries could not meet the demand, and I could go on and on. Now, its because of the rising price of crude oil, Japanese tankers attacked, the dollar is stronger, crude oil is higher, not enough alkylate, strikes, refineries shut down, Iran charging US war ships with small gun boats, defense contractor firing warning shots, and on, and on and on. The Clayton AntiTrust Act as well as the Sherman AntiTrust Act should be enforced on these companies, but no one in our congress seems to be paying attention.

TStew13131 11:50:31 PM May 04 2008

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America's foreign oil bill fell 5.7 percent to $37.7 billion. It was the first decline since February 2007 and occurred even though the average price for imported crude oil hit a record of $84.76 in February. With crude oil ************** record highs on the spot market above $100 per barrel, analysts believe the petroleum bill will resume rising in coming months.

TStew13131 11:49:49 PM May 04 2008

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Oil companies deny they are purposely limiting production of alkylate, which like gasoline, jet fuel and asphalt is a byproduct of the oil refining process. But only recently have some started studying how they can boost output, and alkylate prices today are more than 15 percent higher than spot gasoline prices. That means overall costs will jump when it is added in larger quantities to summer-blend fuel.
The oil companies have know this was coming for years.

TStew13131 11:48:49 PM May 04 2008

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This year, the spring price spike is being exacerbated by two unusual factors: tight supplies of key gasoline blending components and record oil prices. Analysts say alkylate, an ingredient critical to the manufacture of summer grade gasoline, is in short supply and will push prices higher.
They have had so many excuse for the rising cost in oil and gas, now they are in short short supply of alklate, really this is ridiculous! And guess who makes alkylate, the refineries, nice racket!

TStew13131 11:48:03 PM May 04 2008

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The steep jump in summer alkylate prices has also caught the attention of at least two companies that used to produce MTBE. Enterprise Products Partners LP and Texas Petrochemicals Inc., both of Houston, say they're closely studying whether to convert idled MTBE plants into alkylate factories.
That also highlights the conundrum that is alkylate: If too many refiners decide to spend big bucks to crank up production, the premium prices now enjoyed by alkylate makers could disappear. Last year it (alkylate) cost .77 a gal, this year $3.00 gal, nice mark up. Like the oil companies did not see this coming?
Refiners have to weigh the cost of such an investment against the incremental cost of simply buying the extra alkylate they need. "I'm not sure that it would be economical," said Jeff Hazle, technical director at the National Petrochemical and Refiners Association.
But if production doesn't rise, American motorists will be faced with big jumps in spring gas prices for years to come.

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3431 comments