How much is too much for gasoline?

Over the weekend, AP-Ipsos released a poll of drivers in the US and several European countries which asked the question "How much is too much for gasoline?" The answers are probably expected:
Americans angrily grit their teeth as they pump $3-per-gallon gas. They think $2 is about right. In Britain, $3 sounds fanciful - people there pay about $6.40 a gallon and think $5 would be fair.

Spaniards would like to see gasoline for just over $3 a gallon. People in France, Italy, Germany and South Korea put the fair market price $4 or a little more. Australians and Canadians would like to see it just under $3 a gallon.

Granted, this particular article about the poll comes from the Seattle Post-Intelligencer, which I'm guessing is a pretty lefty paper, but the writer seems rather critical of the American lifestyle, as evidenced by his commentary and choice of quotes:
In much of Europe and elsewhere, gas taxes account for two-thirds or more of the price of gasoline. People in those countries look for high-mileage cars. Public transportation is well-developed.

In the U.S., taxes vary by state but amount to about 20 percent of gas prices. Fuel is cheaper in this country than in most parts of the world, investment in mass transit is minimal, gas-guzzling SUVs and trucks zoom along highways and politicians talk about increasing gas taxes - or any taxes - at their own risk.

"We do have a sense of entitlement here in the United States," said Steve Yetiv, a political scientist at Old Dominion University in Virginia who has studied the impact of energy prices.

Of course, the people polled don't necessarily see the reason for high gas prices. Interestingly, though, that sense of entitlement may not be uniquely American (except to the extent that we want gas at $2/gal while others would be content with $4/gal):
A majority of people in most of the nations polled said they think their government can act to limit increases in the price of gasoline. In many of those countries, unhappy consumers have been pushing for more government action.

Another article about the same poll focused on some of the other questions, namely, which concerns are most troubling right now? For the first time in a long time, domestic issues outweigh Iraq and terrorism:
Homegrown problems -- including worries about fuel costs and political leadership -- now rank about even with overseas concerns such as the terror threat and war. Public concerns about Iraq remain high.

People have said many times before on TOD that's it's going to take actual shortages before the American public really wakes up to the critical role of energy in their lives, but maybe here we're already seeing a trend toward awareness.
It shows how disconnected the US lifestyle is from the rest of the world! For the sake of the discussion:
I wonder if there is a graph of gas price as a percentage of disposable income. I could not find one anywhere but I strongly suspect that only in Saudi Arabia and Kuwait gas prices will have lower impact on personal income than USA.

Sometimes I catch myself thinking of Peak Oil as "Peak USA". This is the only country in the world which has not recognized yet that oil is depletable resource and that relying on it is equivelent to digging your own grave.

CNN compiled this data from spring of this year:

IEA follows certain countries going back for years. Here's their graph:

Fascinating graph - it makes it pretty clear what's going on. Almost all the places with really cheap gas are oil exporting countries. The US is a former oil exporting country and the culture about gas use/prices was formed during that era of plentiful domestic oil, and resists easy change.
That's an interesting picture.  It would be nice to see how or if the baselines for subsidy have shifted with oil near today's price.  
I forgot to give a reference:
International Fuel Prices - 3rd edition (May 2003)
A more recent document is this one:
International Fuel Prices 2005, 4th Edition, Dr. Gerhard P. Metschies, GTZ, 2005
warning: big pdf files!
Here is the new graph from the last edition:


The interesting difference to me is the list of countries above the EU threshold (the price in Luxembourg) in 2003 (47) compared to 2004 (29).  Countries as diverse as Israel, Cuba, Chad, and the Cote d'Ivoire have obviously done more to cushion their residents from the rising price than has the EU group as a whole.  In the EU, Malta and Greece, not among the economic mainstays of the union one thinks, have kept their increases below Luxembourg's.

I'm still trying to grasp the national policy advantage of keeping the price of transportation high.  

Iraqi's pay less than 8 cents a gallon!?
  1. Is that economically correct or coming at our lossb (are we subsidizing their gas price)?
  2. Isn't that going to make them ridiculously inefficient?
  3. Would it be too much to ask for them to levy a bit of a tax to take the burden off of us? They could raise a ridiculous amount of revenue and still have some of the lowest gas prices in the world.
from the Seattle Post-Intelligencer, which I'm guessing is a pretty lefty paper

ianqui - don't slander the PI or the article - it's an AP feed - and it also ran in the Houston Chronicle

I'm not slandering! I agree with the author!

But you're right, it's from the AP. I think I got thrown off because I saw various different articles on the same topic, so I thought it was a SPI article. I stand corrected.

OT but did anyone else see (and refer to) this article in USA Today.  It was on the front page of the version of the paper I saw earlier today.

Debate brews: Has oil production peaked?

By David J. Lynch, USA TODAY

Almost since the dawn of the oil age, people have worried about the taps running dry. So far, the worrywarts have been wrong. Oil men from John D. Rockefeller to T. Boone Pickens always manage to find new gushers.

Interesting that the author chose Peak Oil Beliver, Boone Pickens, as an example in this context.

Wow!  Just yesterday, I was marveling at the fact that the Heinberg/Kunstler/Ruppert pessimism had gone mainstream in Great Britain:,,2099-1813695_1,00.html
I wondered at the time how long it would take for that development to occur in the States.  Even with the Simmons factor that's at work here, I figured on waiting months.  Now, here it is in the States too - only a day later!  (I had forgotten about the Pickens factor; he is one of the big boys, after all.)
I think Stuart has it mostly right here:

it makes it pretty clear what's going on. Almost all the places with really cheap gas are oil exporting countries. The US is a former oil exporting country and the culture about gas use/prices was formed during that era of plentiful domestic oil, and resists easy change.

Most of these countries where petrol is expensive were never endowed with the abundance of natural resources that the US has/had.  (Even the UK which was a significant exporter of oil for a while, never really got it ingrained in the national psyche that it was rich with oil - good thing too).

Many of them have experienced periods of sustained deprivation and the necessity of shared sacrifice (e.g. WWII and its aftermath in Europe and Japan).  Gasoline is cheap in the US compared to other parts of the world because no one has presented a reasonable public case to the voters in the US as to why it should be expensive, and that it should be expensive by heavily taxing it.  Though I am a personal supporter of that idea, without an almost crisis situation imminent, the American people are not going to start handing over an extra dollar to the federal government for every dollar of gas they buy.

Bubba--yes, the environment does affect the psyche. The US was blessed with every natural resource: land and topsoil, oil, coal, hydro, forests, fresh water, navigable rivers, climate, game ... you name it. After some early privation at Plymouth and the Virginia Colonies, we figured out how to use this abundance. It built a huge economy, and a cornucopian vision of life.

This has led to huge expectations (for most). We have a perceived "sudden" need to act just a bit like our truly conservative anscestors, and be judicious in our habits. We don't like it.

Should gas taxes go up sharply? Sure. But expect to hear louder voices about how much tax is already being charged, and calls to lower gas taxes in order to control prices.

Just a quick rant: This quote is so asinine and irrelevant, and yet so pervasive in the discussion of energy:

  "They think $2 is about right."

Um, no, sorry, BZZZT! Try again. The price that the gasoline IS SELLING FOR RIGHT AT THIS MOMENT is what the collective market "thinks is about right."

Your price fantasies are utterly irrelevant. Have a nice day.

(Rant over now; thanks!)

Although I have some sympathy for this "rant", I think you are taking the comment out of context.  What something sells for in the global marketplace (in this case on the NYMEX), what an end consumer in various places has to pay per gallon, and what people FEEL like they should have to pay (or at least tell a pollster what they should have to pay) are 3 entirely different things.

In the article where is says "They think $2 is about right.", we are talking about the third situation.  

What I take away from this article is that almost everywhere people think that gasoline should sell for something less than they are actually paying for it at the time.  In the US $3.00/gallon seems exhorbitant because we are not used to it and we are used to a lifestyle that relies on 2.00/gallon gas.  In the UK, people are used to paying much more, and their lifestyle is not as dependent on cheap gasoline.  However, they would still like to have their gas cheaper.

Thank you for replying Bubba, but I stand by my rant: this sort of statement of price desire contains ZERO information and is misleading to the discussion of energy usage.

Come to think of it, I feel that I should make $200/hr, because that "feels right." I work my ass off, why not?

I also feel that my apartment rental should be reduced to $50/month, because after all, $50/month "feels about right" to me, and I bet if I asked every apartment owner in my town, 100% of them would agree! Wow, make it so!

The way a market works is that there is ALWAYS a desire to pay less than something is selling for, so saying "We feel $2 is right" means nothing.

If instead you say "We budgeted $2/gal for gasoline," that is an entirely different statement, one we can discuss. I would say to that "Well, you better learn to budget with some flexibility!"

In contrast, if I budgeted $10/gal for gasoline, I could say "Hey, I'm doing pretty good, it's only $3/gal... look, I'm saving $7/gal!! I am brilliant!!!"

Either way, the reality is what the market price is, end of story. Everything else is just wasted bytes and hot air, much like my post right here. :)


Actually, the price should be higher. The US is subsidizing the price of gasoline with free warship escorts to guard the spice^Woil. I wouldn't be surprised that there are other non-military ways that make the gas cheaper in the US than it otherwise "should" be.

Additionally, there is a lot of lack of information regarding the supplies of oil. If there were well by well production numbers for any country the US did business with, as well as independant analysis of reserves, that would greatly affect price. If it turns out that PO will be occuring before Yergin's 2020 (and especially if it's in the 2010 time frame) futures would shoot up, and that would affect the price today. Or alternately if it turns out that we are awash in oil, that could return us to $20/bbl oil.

What about the $200-300 billion per year spent on construction of roads and highways? What about the billions for road maintainance, public parking lots, airports on public land etc. etc... In reality the real price of transportation is paid by everyone paying taxes no matter how much he/she uses the transportation network which is classic case of unfair redistribution of income by the government. The real price of gasoline should be around 10$/gallon including these costs but noone will do it because our political system does not permit it to happen.
ianqui we do not pay $6.40 a gallon dream on..

i just paid 96pence a litre for diesel today, was not the most expensive place i could have bought from

4.5litres to the gallon is approx £4.30 a gallon if your dollar is $1.50 to the pound then ok $6.4 for the gallon.

i think you'll find we are closer to the $1.80 to the pound.

just so you know, our financial "experts" at the financial times recently compared our classes to yours, our lower working classes are much better off than yours.

no one else is.

our middle working classes upwards all pay more than you for everything and are payed less after tax.

god bless the usa

it's 3.8L to 1Gal.  

0.96 (quid/L)*1.75 (USD/quid)*3.8(L/gal) = 6.38 USD/gal

ah, math still works.

The US gallon and the Imperial gallon are not the same. The US gallon is 3.785 liters, but the Imperial gallon is 4.546 liters. Hence the confusion.
Just as an aside, A US gal is the voume of 8lbs of water, while an imperial gallon is the vol of 10lbs of water. Thus the difference in quarts, pints cups etc.
Not quite:  a US gallon of fresh water weighs 8.34 lbs.
i stand corrected. sorry people didnt know there was different gallon sizes.

we in uk are up for a hard winter but lucky for us big business is looking after us...

BRITISH companies were due to lobby the EU today to speed up deregulation of Europe's gas market as energy costs rocket.
The industry says the sharp rise in prices is partly due to gas imported from Europe being more expensive because of a lack of competition.

The reason gas is so much more expensive in other countries is the tax on gas.  With Fed and state taxes the US consumer pays taxes around 21% (approx $0.43 per US gallon) of the total price of a gallon of gas.  In the UK, tax on gas is 70% of the price (approx $4.48 per US gallon).