An Example of Media Puffery on Gas Prices

This kind of things just drives me batty.

This is from  An article in Time today:

Those labor protests reflect the hit millions of Europeans are taking at the gas pump. As American drivers groan over prices nearing $4 a gallon, the French are paying $8.67 for a gallon of super, compared to $7.10 in January, 2007. A gallon of diesel in French gas stations averages $8.54, up from $5.35 just a year ago. And in the U.K. diesel costs $11.50 per gallon, compared to around $3.90 in the U.S. Across the European Union, the average cost of a gallon of gas runs to about $8.70 — more than twice what Americans are shelling out to fill up. And Europe’s dizzying fuel costs would be even worse if it weren’t for the considerable appreciation of the euro and the British pound against the dollar over the past year, which has partially offset the price escalation in dollar-traded oil.

You see, articles like the above try to make our situation look better, by making ridiculous comparisons that simply cannot be made.

Five years ago, a Euro was worth about $1.10. Now, it’s worth about $1.60 and climbing. A British Pound Sterling was worth $1.60; now, it’s worth $2. And Europeans — and I know this sounds crazy — aren’t paid in dollars; they’re paid in Euros or Pounds Sterling. That’s not to say prices aren’t high over there, but they don’t pay for petrol with dollars. You see, it would cost US that much for a gallon of petrol if we traveled over there, if we got the best exchange rate possible.

The average price for a gallon of petrol in Britain is £5.12, according to this web site.  Three years ago, the average price of a gallon of petrol in Britain was £3.89. That’s a 32% increase.

The average price of a gallon of gas here is $3.94. Three years ago, the average price was $2.08.  That’s an 80% increase.

In other words, in REALITY, if we had seen the same relative increase in the price of gas as the Europeans, our price should be around $2.75 per gallon.

It’s simply a ridiculous comparison to compare gas prices in Europe and here, without taking into account the differences in currency. The British are being hit a lot less hard by gas prices than we are. That’s not to say 32% isn’t a sharp increase over 3 years. But wouldn’t $2.75 a gallon seem like a cheap price right about now?

Don’t buy this crap. This is one of those puff pieces to make you feel good about oil companies scamming you…

I agree, Milt, that when one considers the relative increases in oil prices, we’ve been hit harder here in the last 3-5 years than they have in the EC. However, in terms of actual costs and percentage of a family’s gross income, it can’t be disputed that the average European is being hit harder by their prices for “petrol” than we are here — all other things being equal (which they aren’t, of course), Europeans are still paying a higher percentage of their wages for fuel than we are.
Which means nothing other than that the oil companies are benefitting from the largest transfer of wealth from the general public into their corporate accounts in history — on BOTH sides of the Atlantic…

Yes, you’re absolutely right that the Europeans aren’t hit as hard by the relative price increase in oil as we are, due to the weakness of the dollar. The media comparisons are misleading. However, I think there is an accurate point here: oil is still a cheap source of energy for us. While I think we need to help out those really hurt by the crisis, I don’t think high prices are necessarily bad — it will force us to look seriously at alternatives. We’re already looking at better insulation (and this is a 2006 constructed house) and maybe even installing a geothermal heat pump system. We wouldn’t be doing that if fuel oil was still $1.36 a gallon instead of $4.49. SUV sales are dropping, people are biking more…this helps limit green house gas emissions as well. So, as usual, I’m being a contrarian.

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