Daily Archives: June 4, 2008

The Price of Gas, Europe and the US

I hear a lot of people say we should not complain about the price of gas in the US because in Europe they pay twice as much for gas. I find this argument to be a bit misleading and used to create a false argument for why Americans should pay even more for gas.

Yes the price at the pump is higher in Europe, but the cost of gas itself is not. There are two issues involved, the price of gas and the tax on gas. In the US we have 11% federal, in Europe (France, Germany, Netherlands) you are looking at about 60% for gas taxes. So if the base rate on a gallon of gas is $3.35, the price at the pump in the US is going to be $3.72. In Europe you are looking at about $5.36 for the same gas. The difference is in the taxes.

There is not a price for Europe and price for the US, we all buy our oil on the same global market, so no, Europeans are not actually paying more for gas, they are paying more in taxes. Huge difference in how you look at the fundamentals. Of course there are other factors like local taxes, regulations on emissions, transportation costs, etc…

One thing people don’t realize is the fuel efficiency in Europe is much higher thanks to the lower emission standards on diesel. Yes, that’s right; the Europeans have less stringent standards than the US. Lets take the Honda Fit, which is a diesel version in Europe, it is far more fuel efficient than it’s gas driven American cousin. Same car, a just different engine. So yes, the European is paying more per gallon of gas, but is driving further on that same gallon. If it was not for the higher standards on emissions in the US, the American driver could probably also be driving just as far and being as fuel efficient.

So when people claim Europeans are paying more for gas, remember, they are paying the same, they are just paying more for the taxes on gas and that is what makes the difference in price, not the gas itself.

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