The high price of cheap gas

gas graph
© Lucas Davis

A new study by Lucas Davis shows a wide variance in gas prices, depending on taxation or subsidies.

The figure reveals an enormous amount of variation in gasoline prices. Gasoline prices average $5.26 per gallon, but range from $.09 per gallon in Venezuela to above $9.00 in Turkey and Norway. ... This wide variation in prices is somewhat surprising because crude oil and refi ned products are widely traded internationally, so the opportunity cost of fuels is similar everywhere. Although there are diff erences in transportation, refi ning, and distribution costs, they can explain only a small part of the observed variation in prices. Instead, the more important explanation for the wide variation in fuel prices is that taxes and subsidies diff er widely. Among OECD countries, gasoline taxes per gallon range from an average of $0.49 in the United States, to above $4.00 in Germany and the Netherlands.

consumption© Environment and economics
Here it is shown another way, from a different study, where the relation of price to consumption is even more stark.

The federal gas tax in the United States has not been raised since 1993. It is supposed to provide the money for the Highway Trust Fund that maintains roads and bridges, but doesn't raise enough. So Congress funds $ 50 billion from general revenue to make up for the shortfall, essentially a giant subsidy that keeps the price of gas low.

burgundyPickup Truck Ad/Screen capture

That means that Americans can keep buying big Dodge Durangos and consuming way more gas per person than anyone else in the world, and choosing to commute longer distances in these rolling living rooms.

More in the Atlantic.

Tags: Transportation | United States


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