It's up to $3.78 around here, and thats in the 'burbs.
Luckily I don't live in Cook county either. They are getting killed with prices. Downtown Chicago is already past $4 for reg.
Why Gas in the U.S. Is So Cheap
by Steve Hargreaves
Friday, May 2, 2008provided byCNNMoney.com
Relatively low taxes have kept pump prices far below most other developed nations, which some say is precisely why the current runup is so painful.
Despite daily headlines bemoaning record gas prices, the U.S. is actually one of the cheaper places to fill up in the world.
Out of 155 countries surveyed, U.S. gas prices were the 45th cheapest, according to a recent study from AIRINC, a research firm that tracks cost of living data.
The difference is staggering. As of late March, U.S. gas prices averaged $3.45 a gallon. That compares to over $8 a gallon across much of Europe.
The U.S. has always fought to keep gas prices low, and the current debate among presidential candidates on how to keep them that way has been fierce.
But those cheap gas prices - which Americans have gotten used to - mean they feel price spikes like the ones we're experiencing now more acutely than citizens from other nations which have had historically more expensive fuel.
Cheap gas prices have also lulled Americans into a cycle of buying bigger cars and bigger houses further away from their work - leaving them more exposed to rising prices, some experts say.
Price comparisons are not all created equal. Comparing gas prices across nations is always difficult. For starters, the AIRINC numbers don't take into account different salaries in different countries, or the different exchange rates. The dollar has lost considerable ground to the euro recently. Because oil is priced in dollars, rising oil prices aren't as hard on people paying with currencies which are stronger than the dollar, as they can essentially buy more oil with their money as the dollar falls in value.
And then there's the varying distances people drive, the public transportation options available, and the different services people get in exchange for high gas prices. For example, Europe's stronger social safety net, including cheaper health care and higher education, is paid for partly through gas taxes.
Gas price: It's all about government policy. Gasoline costs roughly the same to make no matter where in the world it's produced, according to John Felmy, chief economist for the American Petroleum Institute. The difference in retail costs, he said, is that some governments subsidize gas while others tax it heavily.
Bogged Down
Most expensive places to buy gas
Rank Country Price/gal
1. Bosnia-Herzegovina $10.86
2. Eritrea $9.58
3. Norway $8.73
4. United Kingdom $8.38
5. Netherlands $8.37
6. Monaco $8.31
7. Iceland $8.28
8. Belgium $8.22
9. France $8.07
10. Germany $7.86
111. United States $3.45
Source: AIRINC
In many oil producing nations gas is absurdly cheap. In Venezuela it's 12 cents a gallon. In Saudi Arabia it's 45.
The governments there forego the money from selling that oil on the open market - instead using the money to make their people happy and encourage their nations' development.
Subsidies, many analysts say, are encouraging rampant demand in these countries, pushing up the price of oil worldwide.
In the U.S., the federal tax on gas is about 18 cents a gallon, pretty low by international standards.
But those relatively low gas taxes make it hard now for Americans to deal with gas prices that have risen from around $1 to over $3 a gallon in the last seven years.
"Everybody pays more, but the U.S. pays more in absolute terms," said Lee Shipper, a visiting scholar at the University of California Berkeley's Transportation Center. If you're already paying $4 in taxes, said Schipper, then an extra $2 a gallon isn't that big of a deal.
Revenues from Europe's high gas taxes are used to fund a variety of things. One thing they have built is better public transportation, said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.
They gave people an alternative to driving, something we don't have in North America," said Tertzakian.
Low fuel taxes and prices sprung out of a national love for mobility going back generations, said Robert Lang, director of the urban planning think tank Metropolitan Institute at Virginia Tech.
Cruisin'
Where gasoline is cheapest
Rank Country Price/gal
1. Venezuela 12 cents
2. Iran 40 cents
3. Saudi Arabia 45 cents
4. Libya 50 cents
5. Swaziland 54 cents
6. Qatar 73 cents
7. Bahrain 81 cents
8. Egypt 89 cents
9. Kuwait 90 cents
10. Seychelles 98 cents
45. United States $3.45
155 countries surveyed between March 17 and April 1, 2008. Prices not adjusted for cost of living or exchange rates.
Source: AIRINC
In fact, the U.S. could not have had the western expansion it did without the cheap mobility railroads and horse carriages afforded long before it became an auto-obsessed culture, said Lang.
"You couldn't have Manifest Destiny unless you could move," he said.
The automobile, and its promise of personal mobility, only deepened the nation's love affair with travel.
"Nobody sang 'She'll have fun fun fun until her daddy takes the tokens away,'" said Lang. 'It's totally romanticized."
Gas consumption Europe vs. U.S. There is some evidence Europe's high gas taxes have capped its oil consumption.
Oil use in the United Kingdom has basically stayed flat from 1980 to now, while in France it's dropped 17%, according to figures from the Energy Information Administration.
In the U.S., meanwhile, oil use is up 21% over the same period, although the country has added more people and seen its economy grow slightly faster.
Americans have taken advantage of cheap gas prices to do other things - like buy bigger cars and bigger houses further away from city centers, said Schipper.
On a per capita basis, Americans use three times more oil than Europeans, he said. That means Americans are more exposed to rising gas prices than their counterparts across the Atlantic.
"Five-thousand square feet in the suburbs, that's much rarer in Europe," said Schipper, referring to big homes. "We dug our hole."
New York - Some of the long-term factors that have pushed oil prices to record levels are starting to change.
In large part because gasoline prices are over $4 a gallon, demand for fuel in the US is falling for the first time in 17 years. China is raising prices for gasoline and diesel – a move that might ultimately lower demand. And, on Sunday, there were signs supply might increase as Saudi Arabia's oil minister indicated that the country would increase production through the end of the year if needed. Iraq is also set to sign contracts with foreign companies to hike production.
"It's all a step in the right direction," says Phil Flynn, an oil analyst and trader at Alaron Trading in Chicago. "These are certainly signs to the market that prices can't just continue to go up."
However, some of the shorter-term factors are becoming worse.
On Friday, the energy markets were digesting news of an attack on a Royal Dutch Shell oil platform in Nigeria that shut down over 200,000 barrels of oil per day in production. Then energy traders fretted over news of an Israeli military exercise involving 100 planes, with some speculating that the aim of the exercise was to send a message about Iran's nuclear ambitions.
And, it's not clear how badly the US corn crop, used to make ethanol, a gasoline additive, has been hurt by the flooding in the Midwest.
"These factors are keeping the price up for now," says Mike Fitzpatrick, vice president of energy risk management at MF Global, a commodities brokerage.
By the end of day Friday, the price of oil had closed at $134.62, down 24 cents for the week. Nationally, the price of gasoline is $4.07 a gallon, according to American Automobile Association, down 1 cent a gallon from the record high.
Short term tensions
The attack on the Royal Dutch Shell platform occurred last Thursday, about 75 miles offshore. Although Nigerian rebels had attacked oil rigs before, this is the furthest from shore they have ventured. "When the manager saw the attack, he immediately shut down production of the oil and natural gas," says Rainer Winzenried, a spokesman for Shell in The Hague, Netherlands.
As of Sunday, the Shell platform was still shut down. Mr. Winzenried says Shell has declared force majeure, a legal move that frees the company from its obligation to deliver oil. "It can only put upward pressure on the prices," says Mr. Fitzpatrick.
The energy markets were also roiled by a news story in The New York Times that Israel had mounted a military exercise involving 100 F-15s and F-16s. The article linked the exercise to Iran's nuclear ambitions. "What are the Israelis thinking?" asks Fitzpatrick. "It lights up the whole area."
Over the short run, the energy markets are also watching for updated corn crop estimates given the flooding in the Farm Belt. On the futures market, the new crop corn is up about 25 percent in the first half of June. "One of the uncertainties is the ethanol situation in the Midwest," says Tancred Lidderdale, an energy analyst at the Energy Information Administration in Washington.
"A number of plants are shut down, there has been a disruption of the distribution process, and the railroads are flooded," he says. "We typically have gotten imports from Brazil, and they can increase their exports but I'm not sure they will."
With gasoline prices on the rise for months, consumers are now starting to cut back. According to the EIA, in the first quarter of the year, demand for gasoline fell about 100,000 barrels per day, or about 1.3 percent of daily consumption. For the year, EIA expects consumption to drop 0.7 percent over 2007. "This would be the first year over year decline in consumption since 1991," says Mr. Lidderdale.
The lower gasoline consumption is probably due largely to less driving. According to Department of Transportation statistics released last week, from November through April, Americans drove 30 billion fewer miles than the same period the prior year. "That's the sharpest drop in recorded history, some 66 years of collecting data," says Doug Hecox, a spokesman for the Federal Highway Administration in Washington, adding that "the drop took place before the price hit $4 a gallon."
China's price hike
Initially, oil prices fell after China announced it was raising the price of gasoline by 17 percent and the price of diesel by 18 percent. Some analysts thought it would cut demand, which grew by 7 to 8 percent on an annual basis in the first quarter. But, in the last three months, demand growth has slowed to 3 percent, partly because of shortages, says Paul Ting, an energy analyst.
Now, he says Chinese refiners, although they are still losing money, might increase production somewhat. "So, we have conflicting forces, higher prices which might have some marginal impact on demand and more product available from the refiners," he says. "I think the end result will be an increase in demand, but not back to the 8 percent growth rate."
Slowing demand may be met by an increase in supply. On Sunday, Saudi oil minister Ali el-Naimi, at a special meeting of oil consumers in Jeddah, said production might increase over the current 9.7 million barrels of oil per day if the market needs extra supplies.
The kingdom had already committed to produce an extra 200,000 barrels a day starting in July on top of an additional 300,000 produced in May.
The extra Saudi production comes at a time when Iraq is also talking about adding to its capacity. Last week, the Iraqi government said its production was up to 2.5 million barrels per day, about where it was prior to the coalition invasion. On Sunday, officials also said it was awarding additional oil contracts to 41 foreign companies in the hope of boosting exports by another 500,000 barrels per day. It will be the first time the global energy companies will be back in Iraq since Saddam Hussein kicked them out in 1972.
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