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AMar 5, 2012

Cheap Gasoline---Right Under Our Noses

Andrew Hallam
Cheap Gasoline---Right Under Our Noses

Two weeks ago, I packed my car for a weekend road trip. I live in Singapore, an island city state in the South China Sea, measuring 26 miles by 15 miles. The drive was going to take me across the border, into the country of Malaysia, which is linked to Singapore by two bridges.

A friend of mine (she’s formerly from California) retired to a small Malaysian village last year, and I wanted to check it out. Before leaving Singapore, however, I had to ensure that my Mazda’s fuel tank was at least ¾ full. I pulled into a gas station, added $60 of fuel to the Mazda’s tank, bringing the gauge to the three quarter mark.

If I attempted to drive into Malaysia with less than three quarters of a tank, I might be stopped at the Singapore border and slapped with a $500 fine. Singapore doesn’t have any long term debt. And wishing to remain that way, the country heavily taxes its fuel, while discouraging cheaper cross border fuel shopping in Malaysia.

After driving for a few hours along Malaysia’s winding roads, I stopped at a gas station to top up the tank. And I was amazed how little I paid for the gas. Not since my last visit to the United States had I paid so little to fill a gas tank.

I can guess what you’re thinking:

This Hallam joker must be living in a time warp. If he saw our pump prices today, he’d be shocked.

Recently, I did check out American fuel prices online, and I was surprised.

But no, I wasn’t surprised at the expensiveness of U.S. fuel; I was surprised at its cheapness.

Right about now, you might be wishing I was across the room from you, so you could toss something sharp and heavy at me. Maybe I deserve it. But please read my defence first. American fuel prices are really cheap, and they haven’t risen as much, in recent years, as the fuel costs in most other countries.

On February 20th, 2012 fuel costs in the U.S. still averaged less than $4 a gallon—a bargain by most international standards.

Here’s a sample of average global fuel prices, converted to U.S. dollars and U.S. gallons:

  • United States: $3.53 per gallon
  • Canada: $4.72 per gallon
  • Australia: $5.77 per gallon
  • France: $7.58 per gallon
  • England: $8.07 per gallon

Why is American fuel so cheap? And why hasn’t it increased as much as nearly everyone else’s fuel costs? Those are the questions that many non Americans are enviously asking.

The global fuel price discrepancy is gaining attention. In May, 2011, The Atlantic ran an article with some shocking international comparisons.

At the time, average U.S. fuel prices were reported to be $3.96 per gallon. Here’s a sampling of other countries’ fuel prices, per U.S. gallon, in mid 2011:

  • Spain: $7.60
  • Greece: $9.53
  • Netherlands: $9.58
  • Germany: $9.07
  • France: $9.24
  • Sweden: $9.13
  • Canada: $4.70

Many Australians and Canadians argue that their countries’ cities and towns are far more spread out than they are in the U.S., so their fuel costs, they argue, should be cheaper than American pump prices, not more.

The difference in international fuel costs comes down to one major issue, however: taxation. The U.S. government doesn’t tax fuel as highly as most countries do. But what if it did?

Take Australia as a comparative example. If the U.S. taxed fuel to the same degree that the Australian government taxes at the pump, American gas would cost roughly $5.77 per gallon today.

With 125 million cars on American roads travelling an average of 15,000 miles per year, such a fuel tax increase could earn the government an extra $4 trillion of revenue in just two decades.

Applied to the national debt, this could have some long term benefits.

Of course, those who drive for a living would likely require some kind of subsidy, and every driver would get hit in the wallet. It would hurt, short term. But in the long run, it might be beneficial.

If you’re really keen to escape higher fuel prices, you could always move to Malaysia. Such a bold move, perhaps, would only suit the quirky. But it might be worth exploring in another article, don’t you think?

Filed Under: Foreign Perspectives