Feb 16th 2011, 17:50 by The Economist online
Are taxes or crude oil prices to blame for expensive petrol?
PETROL prices have risen steeply in rich countries, triggering heated arguments about whom or what is to blame. America’s energy department recently blamed a jump in petrol prices of 3.1 cents per gallon in the space of seven days on the political unrest in Egypt affecting crude oil prices. Japan’s government blamed the high price of crude oil for its tenth weekly price increase at the pump. The British government has given the same explanation for price increases averaging 15% in the year to January. But with the oil price still at only two-thirds of its peak in mid-2008, this is not the only cause—as the three charts below show.
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Over the past five days
Over the past seven days
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Funny given how much Americans complain about the price of gas. But understandably so since we rely on the car so much. Another reason why fuel price hikes hit us harder than other European countries. They're used to high prices, we aren't.
Sadly, our politicians haven't the balls to tax petrol more than it is now and changes are that will never change. Imagine what infrastructure improvements we can fund with that (besides paying interest on our massive deficit of course)
This chart's a clunker and should of been titled 'Petrol prices in Europe, Greece, Japan, & the USA'.
You could easily put together a chart that showed that low-cost Petrol is indicative of poverty.
One could also say that the US subsidise petrol prices more than other countries. It would be hard to maintain that $0.10 per litre compensates for all externalities
When petrol prices were 4 USD per gallon in 2006, the sales of smaller cars went up and those for fuel guzzling SUVs went down, proving that taxing petrol to effect change works. The Europeans wisely figured this out decades ago. Foolish Americans keep thinking petrol prices should be cheap when in fact they should be taxed to at least 4 USD per gallon, resulting in significant reductions in both the amounts of oil imported and greenhouse gases created.
Raising US prices to 1.25 per litre would trigger another revolution. Bread and circuses; cheap food and cheap gas; keeps the masses mollified and off the backs of those who govern the country and run the businesses and banks.
Zod - we do rely on the car so much for long commutes but you won't see anyone in Europe commuting to and fro in a Chevy Avalanche, Ford F-350, or Cadillac Escalade. That is just inexcusably wasteful and I have no pity for the drivers of those cars.
In fact I would prefer gas prices to continue to go up to get those beasts off the road.
@Eduardo-b
"...reductions in both the amounts of oil imported and greenhouse gases created."
-------------------------
From the US economy point of view encouraging people to drive smaller cars would increase imports (or do the US firms now build smaller cars?). That would create unemplyment in car towns and a lot of shouting.
Absolute dollar prices versus percentage changes in local currency - could you have made these charts more confusing?
Your charts certainly demonstrate that excise tax rates and currency fluctuations can affect consumer prices.
Yeah, yeah, yeah...... blah blah blah blah.... some more blah till kingdom come! As if all this is a CONCRETE data that has integrity! Missing: The BIGGEST variable in the calculation: SPECULATION!!!!!!! Until there are rules and enforcement, no amount of study or analysis amounts to hell-a-beans!
At times, the Economist has a heightened awareness for the Irrelevant.
It shows we have honest politicans here in the U.S.A. (See Simon Cameron)
It is simple to blame petrol prices on taxes or the fickle price of crude oil, however, someone should point out that most oil companies(with the exception of BP) reported HUGE net profits in 2010; Chrevron tripled its profits during the second quarter of 2010. Occidental increased its earnings by 61%. So, if after taxes and cost of crude oil is accounted for, there is still so much profit, then someone is being fleeced. And while I am on the subject, if I owned the oil fields(or had a vested interest in them), the refineries and the distribution system,(directly or indirectly), not only I would not worry about rising crude oil prices, I would push to increase them by bidding high rather than low on future orders. Who would know? Just a thought.
For those of us in Europe, I guess we are about to test the true level for inelasticity of demand for fuel. Almost inevitable that we will see a disaggregation of the market as a whole into discretionary fuel spend versus essential spend for the domestic segment and a clear delta in the baseline spend profile versus commercial users. For those of your readership in the US, an opportunity to reflect on their total fuel prices being less than the duty component of many European countries.
Why is China left out of this?
It's too late to increase gas prices in America by taxation, the right time would have been before an entire society and its infrastructure was built on the underlying assumption that gas prices would stay cheap forever.
It's incredible that whilst the US are in fear of $4/gallon petrol prices, in Europe we are paying almost $8/gallon. The best way for Obama to increase effeciency of cars on US roads would be to get gas prices up to European levels, admittedly doing this in one hit would cause massive problems for the economy. Instead, they should introduce a phased increase with a minimum price for gasoline, starting at $4/gallon in 2012 increasing at $0.50/year until parity with Europe is reached. Two things would be certain, (1) huge revenues would be created for the treasury and (2) consumption of foreign oil would be reduced (or eliminated, as the US of course produce large amounts of oil on their own soil) with resultant CO2 emissions being slashed. Personally, I don't think doubling petrol prices would cause any problems to US citizens disposable income as people with 20 mile per gallon cars can easily buy ones with 40 or 50 miles per gallon consumption. I would like to hear an American perspective on this...
The chart would be a lot clearer if the less variable item (pale blue, ‘other’) touched the axis. Please switch the series.
To HWLanier:
Why should the chart be named; Petrol prices in Europe, Greece, Japan and USA? Does that by any chance imply that Greece is no part of Europe at all, or that the trends on the price f oil and duty charge do not at all reflect those of its european partners?
As for the rest, BRICs should also be included to make a comparison!
What elements make up the 'other' variable?
**The only and unique responsables are the scrumblers speculators that manipulate prices in all the markets. No other reason.
What is particularly frightening is the release last week of a Department of State cable showing that Saudi Arabia does not have nearly the oil reserves and production capability that had been previously thought. This alone will ultimately have a marked impact on the world's economy since Saudi Arabia will no longer be able to turn up the taps to keep the price of oil from rising.
Here is the cable showing the issues facing the world's oil market:
http://viableopposition.blogspot.com/2011/02/peak-oil-inconvenient-truth...