Thursday, March 3, 2011

Upset over gasoline prices: U.S. drivers are paying about $4 per gallon while U.K drivers are paying about $8 per gallon, why?

Yesterday I wrote an article called “Will the raising gasoline prices across the United States and internationally make drivers change their driving habits or even buy a more fuel efficient vehicle?”.

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In that article, I discussed and agreed with LeaseTrader.com that most consumers wouldn’t really change their driving habits or even go further and buy a different vehicle with better fuel economy until gasoline prices here in the United States top $4 per gallon.

Even more though, over the last 24-48 hours especially here in the United States, several states have already seen a few and I mean few gas stations top $4 per gallon. It certainly is weird, but not uncommon to see gas prices in any given state differ as much as 50 cents per gallon. Here in Massachusetts, that has already been proven with some gas stations saying they have to charge that much to stay in business because they sell a fifth in gallons of what major gas stations do.

On the other side of this debate, one article that I read recently that is called “U.S. Drivers: Shut Up, Stop Whining, You Don't Pay $8/Gallon”. The article highlights the fact that while U.S. drivers are paying about $4 per gallon, over in Europe, London in particular is paying double that at $8 per Gallon. Of course I should mention that they get charged per liter and a gallon is larger here in the U.S. then in the U.K..

However one wouldn’t be so quick to agree or disagree because there are a few simple reasons why London in particular is paying and yet why U.S. drivers should still be upset.

First, U.S. drivers have every right to be upset over high gas prices and what they pay at the pumps.

One reason is gasoline prices are a nightmare in the U.S. especially, they change daily and I mean change daily from fuel station to fuel station. Two, the United States is actually behind a lot of countries including in London itself, in that our primary fuel is gasoline. And without gasoline, we aren’t going to work, we aren’t shopping or just setting out and driving around for whatever reason.

Three, here in the United States, while we do have diesel (and bio-diesel) as well as E85, but we don’t have many diesel and E85 vehicles on the road and E85 isn’t available everywhere. Diesel on the other hand is many used for 18 wheelers. Simply put, our fuel supply is mainly gasoline even though some cars do run on E85, bio-diesel and diesel. We even have hydrogen pumps at a few fuel stations around the country.

But it’s a completely different story in other countries. One country in particular and the reason for this article is the United Kingdom. First and for most, if you live in the U.K., you also have every right to be upset over gasoline and diesel prices, they are double what U.S. drivers pay.

Right now in the U.K., I would say that while the average price of gasoline is around double he price if the U.S., there actually price per gallon without taxes is without a $1 of the United States.

However I’m sure your asking, well they why are gasoline prices about double, well that’s easy, one word, taxes. In the U.K., they have a lot of taxes that they have to pay in order to own a car and that includes what they pay for each gallon or liter in there case of gasoline.

A perfect example of that is here in the U.S., our gasoline tax comes both from the federal government which hasn’t changed since 1993 and from each state. Basically there is a federal gas tax and a state gas tax. Each state charges a different amount in tax. New York and Connecticut are high compared to other states.

While in the U.K. that is completely different, U.K drivers have to pay fuel duty tax:

“From 4th January 2011 the UK duty rate for the road fuels unleaded petrol, diesel, biodiesel and bioethanol is GB£0.5895 per litre (£2.65 per imperial gallon or £2.20 per U.S. gallon). Value Added Tax at 20% is also charged on the price of the fuel and on the duty.” – Wikipedia

Yeah you read that right, each liter has a fuel duty tax and a value added tax on top of the actual per liter cost of gasoline. Damn that’s big.

By the way, that an extra about $4.00 per liter or gallon tax in U.S. funds which is double the price of U.S. It’s all in the taxes that are added. However there is also one other thing, unlike here in the U.S. which mainly runs on gasoline for cars and diesel for 18 wheelers, the U.K. has a wider range of alternative fuels to use and the vehicles to back it up from gasoline, diesel, to biodiesel, E85 and more.

Hopefully this article explains a little bit of why U.S. drivers and U.K. drivers pay what they pay and the fact is, U.S. drivers have every right to upset over gasoline prices partly due to the fact that they do jump so much, as much as $1-2 in such a short period of time. I’ve seen 30 cents different over a weekend and that’s not right. Basically we don’t have as many options.

For the United States, we need alternative fuels and vehicle that runs on them in order to reduce our dependents on foreign oil.

As for the U.K. drivers as well as in other countries, you have every right to be upset to, that is expensive. The best advice I can give is when buying your next vehicle, find one with good fuel economy and maybe not on gasoline if an alternative fuel is available in your area.