Put another way, why is it so much cheaper in the US?
Is it much more heavily taxed in Europe?
Does the US have a much larger amount of oil locally drilled and refined than Europe in general?
Is the cost of transporting the oil/gasoline to the European countries high?
Is it all of the above?
[Moderator Hat ON]
Sounds like a General Question to me. There probably is an actual factual answer to these questions.
[Moderator Hat OFF]
Taxes, pure and simple.
I think you answered your own question. There is far more domestic production of petroleum in the U.S. than one is lead to believe.
European countries generally fund their roadways with gasoline taxes. We merkins build roads with funds from (mostly) federal income, state sales, and local property taxes. I’m not sure whether this completely explains the discrepancy - they might also be simply discouraging the use of cars.
I talked to a guy who lives in Singapore a couple of years ago - his Honda Accord cost him over 100,000 US dollars. Now that’s discouraging ownership of cars.
It’s because Americans have more a right to drive than the rest of the planet. To help us with this, our gas prices are lower.
(How’s that for being an Ugly American?)
The US has a large amount of domestic oil [land based and shallow water based]. It only imports about 25% of its usage so our effective price is less than a country totally dependent on imported oil. The North Sea oil is located in much harsher environment than shallow water Gulf of Mexico oil, so it will cost more to produce.
Then you have markets for by-products. Gasoline is cheaply made from only a portion of the oil. You need other industries that have a need for those by-products, or you will have to make expensive gasoline out of them.
With the relatively small size of European countries, you have the hassle of international shipping [and import/export taxes]to sell the by-products to other countries for use. This lends itself to smaller less effecient refiners and secondary users, with limited market for the finished product.
The US is big enough that it doesn’t have this problem. Europe seems to be going this route but a lot of its infrastructure will have to be changed [at high cost which must be paid for on the products, so nothing cheap soon].
Then, you have the taxes, as others have mentioned. They are designed to keep prices high.
Actually the U.S. imports over half of what it consumes. We crossed the 50% line in ~1994 and haven’t been back since. We produce about 6+ MMBOPD and import about 8+ MMBOPD (crude). We are still amongst the top four producing countries in the world, but our domestic production peaked in 1970. The U. S. is easily the most picked over part of the world as far as exploration goes.
While the price of a barrel has been bouncing around in the $30 range of late, I’ve seen estimates that attempt to factor in the cost of the Gulf War and our other Mid-East security efforts that put the price of a barrel to the American public, when it was ~$18 on the market, at $60-80.
Our petrol(gas to you guys) is heavily taxed.
This was brought up in the media recently where a US pickup driver worked out that it would cost him 6 times as much to fill up in the UK(never mind about the shppiong cost!)
Even the tax has tax imposed upon it, first is added duty and then VAT on top of that.
To drive a vehicle on our roads you also have to pay a road fund licence (more tax) which varies from £15 for a motor bike under 250cc to a car at around £140 to over £2000 for a lorry.
We pay more for our cars, a lot more, more for spares and servicing and still more to insure them, oh nearly forgot, our interest rates are usually a couple of points higher than the US so finance costs more too.
Taking the cost of all these items and also including the devaluation of the vehicle year on year it probably costs in excess of £80 per week to run an average (mid to low range) car.
The only reason that many of us can afford to drive at all is that over 2/3 of new cars on our roads are company owned.
Good job ours is such a small country!
Mjollnir is correct, the difference is taxes. U.S. motor fuel taxes are very low (US$0.0486/liter in federal excise tax [as of 1998] plus from US$0.0198/l to US$0.0845/l in state taxes [as of 1 Jun 00]). In contrast, European motor fuel taxes not so low. For example, in the Netherland, per liter taxes apparently amount to US$0.5486/l and there is a VAT of 17.5%.
Oil is a globally traded commodity. Like other globally traded commodoties, such as sugar, copper, gold, coffee, etc., it is produced in many places around the world and consumed all over the world. Like other globally traded commodities, its global price depends on the balance of global production and global demand.
The local price of motor fuels (exclusive of duties and taxes) is determined mainly by the global price of oil. Transport costs don’t play much of a part (unless you are living on a remote island or mountain top) since just about all oil hass to be shipped somewhere and refining costs just add a fixed amount since the cost of refining is pretty much the same everywhere.
An individual producer’s cost of production has no bearing on price except to the extent that it affects global production. Don’t think that the Norwegians can’t charge more for North Sea oil than the Americans charge for Gulf of Mexico oil just because it was harder for the Norwegians to get their oil out of the ground.
Compare oil with another globally traded commodity, gold. The price of gold is pretty much the same all over the world. You don’t expect to find bargains in gold in Irian Jaya/Papua just because the Grasberg mine is there. You don’t expect to pay extra for it in Switzerland because they have to import all of theirs.
The price of gasoline/petrol at retail is mainly determined by the global price, local supply, and TAXES. Look at the U.S. Where is the cheapest gas in the U.S.? Georgia. How much oil does the Peach State produce? None. California, on the other hand, produces oil but has among the highest prices at the pump.
As for “the hassle of international shipping [and import/export taxes]” because of “the relatively small size of European countries”: the last time I crossed a border between two European Union countries there wasn’t one.
I agree that it obviously comes down to tax, for reasons clearly given by Yeah and others. What I want to know is, why are US petrol taxes so low compared with Europe? If it makes economic sense one way and global environmental sense the other, is the US just particularly unscrupulous, or are we particularly stupid?
I think the answer, Suspicious mind, is both.
Does anyone remember Congressman John Anderson from Illinois who ran for president on a platform that included a US$0.2642/liter gas tax? I thought not.
I thought I did put it in GQ, oops. Sorry.
I guess that explains why I couldn’t find it.
Suspicious –
It all comes down to history and population density.
When the mass-produced auto was invented, densely-populated Europe already had all sorts of effective mass transit systems. In the comparatively lightly-populated US, though, the auto’s personal transporation provided vital flexibility, something the country’s nascent mass transit couldn’t offer.
The auto quickly came to be seen as a necessity to all manner of people in the US, whereas in Europe it still tended to be seen as a luxury item. Hence the historically different views on gasoline taxation.
Wumpus, you have a convincing argument, and no doubt there is a general truth in what you say, but…
What about a huge country like Norway (current population about 4 million), where transport of any kind has always been a problem? Petrol is just as expensive as in the rest of Europe, even though cars really are the only form of transport for many people. How then, did attitudes to petrol taxation develop differently in such places compared with the US?
WAG: After WW2, many European countries faced deep financial problems, and cars were seen as enormous luxuries compared to the US. Rebuilding, rationing and “getting back to normal” were far more pressing than consumerism and conspicuous consumption.
Never finished that last post, did I?
Basically, continuing the WAG, as car ownership was seen as a luxury rather than a right, attitudes towards taxation of such a luxury were more relaxed.
Suspicious –
Looking at an atlas, it seems that the best way to get around Norway isn’t by auto or train, but by boat…
So, if my theory is correct, we’d expect Norway to have high taxes on gasoline, and very, very low taxes on boat fuel. 