Monday, 23 December 2013

The high price of cheap gas

This article has been reposted from  You can read a related article in the Atlantic.

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

gas graph
(Copyright: Lucas Davis - Reposted from
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.
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.

- Submitted by Gareth

No comments:

Post a Comment