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gasoline is half-price
2013-Nov-23, Saturday 04:51 pmI haven't been able to understand why U.S. gasoline prices are so low. I predicted in 2009 that gas prices would top $4/gallon during 2010, but it didn't happen until 2013, and it held that price only a few weeks during a local shortage. Last week, I saw it back down as low as $2.99/gallon. It doesn't make any sense at all. The price of a barrel of oil is the same everywhere in the world, so how is USA gasoline so cheap? Do we have faeries who refine our oil into gasoline with their magic?
I decided to check the numbers. I can easily explain the cheapness now, but the explanation is repugnant.
Bloomberg offers a nice data visualization tool that lets you explore recent prices across different countries. It shows US prices at $3.66/gallon and UK prices at $7.75/gallon. I have a discrepancy of $4.09/gallon to explain. I assume that part of the explanation is that they tax it much higher than we do. Supposedly, US taxes account for about 17% of the final cost, while the UK is closer to 63%. When I remove those taxes, I find that US gas price is about $3.15/gallon, and UK gas price is about $4.75/ gallon. I still have a discrepancy of $1.60 to explain.
According to U.S. government figures, the USA consumed 6.87 billion barrels of oil in 2010. For simplicity, let's assume it was all used for gasoline, so again using their figures, those barrels would produce 3.11 billion gallons of gasoline. At current (untaxed) prices, those gallons would sell for $9.80 billion. At the same time, the oil industry receives about $7 billion per year in subsidies, nearly as much money as consumers pay for the gasoline directly. Divide that subsidy by those gallons, and you get $2.25/gallon in subsidies paid to oil companies.
Subsidies account for more than the discrepancy that I needed to explain. I assume that the extra money disappears to the inefficiencies of running a plutocracy. I am unamused. I am very bothered by the idea that Americans pay higher federal taxes so that we can maintain the illusion that gasoline prices are cheap. It's the usual steal-from-the-poor scheme that I've come to expect from American government. How fast would consumer behavior change if gas prices reflected their true cost? Pretty fast, I'd think. I know some people were changing their driving habits earlier this year, when gas prices were skyrocketing locally for only a few weeks.
Now it's even more important to me that I reduce my fuel consumption, knowing that all of us are paying higher federal taxes so that some of us can continue to guzzle petroleum. The business concept of shipping human bodies back and forth daily is just ludicrous. I need to find a job where I can either telecommute, ride mass transit, bicycle, or (dare I dream?) walk to work.
I decided to check the numbers. I can easily explain the cheapness now, but the explanation is repugnant.
Bloomberg offers a nice data visualization tool that lets you explore recent prices across different countries. It shows US prices at $3.66/gallon and UK prices at $7.75/gallon. I have a discrepancy of $4.09/gallon to explain. I assume that part of the explanation is that they tax it much higher than we do. Supposedly, US taxes account for about 17% of the final cost, while the UK is closer to 63%. When I remove those taxes, I find that US gas price is about $3.15/gallon, and UK gas price is about $4.75/ gallon. I still have a discrepancy of $1.60 to explain.
According to U.S. government figures, the USA consumed 6.87 billion barrels of oil in 2010. For simplicity, let's assume it was all used for gasoline, so again using their figures, those barrels would produce 3.11 billion gallons of gasoline. At current (untaxed) prices, those gallons would sell for $9.80 billion. At the same time, the oil industry receives about $7 billion per year in subsidies, nearly as much money as consumers pay for the gasoline directly. Divide that subsidy by those gallons, and you get $2.25/gallon in subsidies paid to oil companies.
Subsidies account for more than the discrepancy that I needed to explain. I assume that the extra money disappears to the inefficiencies of running a plutocracy. I am unamused. I am very bothered by the idea that Americans pay higher federal taxes so that we can maintain the illusion that gasoline prices are cheap. It's the usual steal-from-the-poor scheme that I've come to expect from American government. How fast would consumer behavior change if gas prices reflected their true cost? Pretty fast, I'd think. I know some people were changing their driving habits earlier this year, when gas prices were skyrocketing locally for only a few weeks.
Now it's even more important to me that I reduce my fuel consumption, knowing that all of us are paying higher federal taxes so that some of us can continue to guzzle petroleum. The business concept of shipping human bodies back and forth daily is just ludicrous. I need to find a job where I can either telecommute, ride mass transit, bicycle, or (dare I dream?) walk to work.