Wednesday 11 May 2011

Cheap fuel is costly

The BBC wants to know why Americans are so angry about petrol prices. Here's 'crossrider' of the Cycalogical blog:
The USA has the lowest petrol taxes of just about any developed country. So you would think that because they spend about half of what we do on a litre of motor fuel, petrol prices wouldn't be much of an issue. In fact, the opposite is the case. They have seen a much higher percentage increase in the forecourt price as the underlying oil price has risen, and because super-cheap fuel has enabled them to become highly dependent on big, thirsty vehicles for everything from shopping to commuting, and because they typically live further from their workplace than the average European, the sudden increase in the oil price has really squeezed ordinary Americans.
I think that's exactly right.  To go back to the BBC story:
At Tyson's Corner Center, a huge shopping mall in northern Virginia, motorist after motorist said it was hurting them in everything they did - the commute, the weekly shop or the school run.
Yes, if everything you do involves buying fuel, then increases in the price of fuel are going to hit you really hard. And it's not like Americans spend less on car transport than us Europeans. The price of fuel is low, but as crossrider says it has just encouraged the average American to consume more fuel, and to buy and maintain more cars than the average European. All that adds up. 

For some numbers, see this fascinating paper on household transport spending in OECD countries by Jari Kauppila. His main chart is below (you might need to click for a larger version).
Looks like transport takes up about 18% of total spending for the average US household, compared to about 14% for the UK. Here's a breakdown of total US household transport expenditure:
Only 6% of average US household transport expenditure goes on 'transport services', i.e. public transport (compared to about 26% in the UK. The rest goes on cars, whether it's buying them, maintaining them or fueling them.

By my sums that means the average US household spends about 17% of its total expenditure on cars, compared to about 10% for UK households. So the fuel may be cheap, but the whole package certainly isn't. And that's not including the wider costs of a car-dependent society, of course.

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