Monday, January 26, 2009

Historical Unleaded Gas Pump Prices

In the investigation I performed for my post this week, I stumbled upon an interesting data set from EIA. They have tracked gas prices in several European countries and the United States weekly since 1/1/1996 and made that data available on their website.

The plot I've attached to this post shows all but one data series (Italy). All prices are tracked in USD/gal, as indicated on the plot. The scale on the bottom of the graph is supposed to be in 2 year segments but is instead 730 days, which works except on leap years, hence the odd date shift. I've chosen to show only data for the past 10 years, as it illustrates the same point. Gas prices both in the United States and in Europe follow roughly the same up and down trends. Both regions saw a meteoric rise in prices during 2007 and 2008 and an even more rapid decline with recent economic troubles. The huge gap between gas prices is largely associated with taxation. I did not want to fish around for primary sources for tax rates in each of these countries, but to illustrate the difference, I'll use US tax rates and UK tax rates.

I found gas prices in the UK using and today's currency conversion from At their suggested postcode (since I'm unfamiliar with locales in the UK) RG1 8EG, the average petrol price was 0.877 £/l (4.71 $/gal). In the UK, a duty of 0.5235 £/l is applied to unleaded petrol and VAT (value added tax) of 15% is applied to both the duty and the fuel itself. Stripping away these taxes leaves a base fuel cost of 0.24 £/l or 1.28 $/gal. In the US, the average tax rate is 0.45 $/gal. The average pump price, as cited in my last post, is 1.84 $/gal. That leaves a base unleaded gas cost of 1.39 $/gal. To compare taxation directly, US consumers pay 0.45 $/gal and those in the UK pay 3.43 $/gal.

In the UK and US, we pay about the same for a gallon of unleaded gas before taxes. After taxes, consumers in the UK (and other European countries with similar levels of taxation) pay significantly more than we do, despite having slightly lower per capita GDP. While many of these countries have used income from fuel taxation over the past century to build robust public transport infrastructure, providing mobility to lower-income persons and shielding them from high fuel taxation, I'm not convinced that now is not the time to begin moving our own taxation and development in the same direction. It is a shame that all the political capital in the world is undoubtedly insufficient to overcome the unpopularity that is sure to meet the idea of increasing federal gas taxes.

1 comment:

Rafi said...

While raising taxes on gasoline in the United States may be unpopular with our society, putting that extra money toward better public transportation systems throughout the states could increase the use of greener travel methods and even increase the interest in alternative systems to the gasoline combustion engine. Improvement in current public transportation can decrease pollution in cities by increasing the efficiency of the transportation and enticing more citizens to use it. Recent developments in the surrounding areas of cities such as Austin can also improve our environment with the development of the light rail. The increase in taxes on gasoline could also entice citizens to cut back on gasoline purchases, opting instead for diesel or hybrid cars. With the probable unpopularity of the higher gas prices, citizens may even work harder toward the research and development of greener transportation.