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Pump prices were hovering near record highs in mid-May even before the onset of summer in the Northern Hemisphere and winter in the likes of Australia and New Zealand. In the latter, there will be the usual heavy demand for heating oil. In turn, hordes of tourists and vacationing families in the U.S.A. and Europe mean strong demand for gasoline and jet fuel.
It does no good to try and placate the public with the questionable notion that this is not the worst it has ever been. Economists can argue till they are blue in the face that, in inflation-adjusted dollars, the price of gasoline has yet to breach the all-time high of early 1981 when the Iran-Iraq war seriously put a crimp on crude oil supplies from those two key producers.
It is no consolation at all to motorists who are frustrated every day by pump prices that, the U.S. Energy Information Administration (EIA) reports, averaged $3.218 a gallon in mid-May. Though prices moved sideways going into the key Memorial Day weekend, the outlook for June is bleak. Chances are, there will again be upward pressure on prices owing to the deadly combination of the above-mentioned buoyant demand and production shortfalls at American refineries.
Nor is this phenomenon limited to the U.S. On May 17, crude oil breached the $70/barrel barrier as robust demand from China and India compounded a supply contraction brought about by unrest in Nigeria and OPEC intransigence that global crude supply was “adequate”.
On a global scale, however, American pump prices are surprisingly affordable. Back in February and March, when average gasoline prices across the nation stood a dollar lower at $2.23 a gallon, U.S. motorists actually had it better than those in some developing countries where the standard of living is definitely lower: Vietnam ($2.27), Mexico ($2.36), Bangladesh ($2.42) and India ($3.75). And in Russia, retail prices of gasoline were 15% greater than in the U.S.A.
Gas was only slightly cheaper in Third World countries that produced some crude oil of their own: China ($1.93), Malaysia ($1.93), Nigeria ($1.85), and Indonesia ($1.67).
Compared to their counterparts in the industrialized economies, American motorists still had it fairly easy. Average retail prices in the U.K. ($5.94), Norway ($6.21) and the Netherlands ($6.25) ran about triple those in the States. The major reason for the difference? High taxes exceeding $4 per gallon, ostensibly to encourage the populace to use public transportation.
Motorists in South Africa ($3.24) and Australia ($3.32) paid a dollar more than Americans did. Singaporeans ($4.09) forked over a dollar and eighty-six cents more, on average, while Japanese ($4.54), South Koreans ($5.38) and the French ($5.56) paid twice as much or close to it. Finally, Germans ($5.87) and Italians ($5.72) typically paid about $2.50 more than Americans did.
In large part, these disparities in international pump prices reflect tax and vehicle regulation policies. However, the fairly rapid increase of gas pump pain has been due to “external shocks,” specifically OPEC pricing policies. A selective EIA review of weekly retail prices back to January of 1997 up to May 18, 2007 revealed that Rotterdam motorists endured cumulative increases of 288 percent in that time. But this did not differ materially from the gasoline price inflation that hit car owners in Singapore (250 percent), New York (242 percent), the Gulf Coast (273 percent) or Los Angeles (225 percent).
While on the subject, it should be noted that gasoline inflation seems mildest in L.A. only because more stringent regulations ensured that Californians already lived with pricier gasoline to begin with.
Obviously, then, there are wide differences in gas prices around the world.