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U.S. Gasoline a Bargain as Drivers Pay 63% Less Than Norway

Moming Zhou
Business Week
August 30, 2012

For all the complaints about U.S. gasoline prices, Americans spent 63 percent less at the pump in July than Norwegians did on a gallon of the fuel.

The U.S. ranked 49th of 60 countries, according to data compiled by Bloomberg, with premium gasoline at $3.75 a gallon on July 23, compared with $10.12 in top-ranked Norway. The U.S. price was behind Japan, China and India, a country where people made 2.9 percent of what Americans earn.

Drivers in America, the biggest oil-consuming country, spend an average of 2.8 percent of their daily income on a gallon of gasoline, 55th in the ranking. In India, a gallon of premium gasoline cost 37 percent more than what a worker earned in one day. In Norway, which has the second-highest income behind Luxembourg in the list, a gallon cost 3.7 percent of a day’s wages. U.S. prices dropped 11 percent from three months earlier as domestic oil production reached a 13-year high.

“One of the reasons that Americans are able to use so much gasoline is because it’s relatively cheap,” said Peter Schiff, chief executive officer of Westport, Connecticut-based brokerage Euro Pacific Capital, which has $3 billion in customer accounts. “A lot of Americans commute long distance to work. In a lot of other countries gas is a luxury and they maybe just take the car out for a drive on a Sunday.”

Oil futures for October delivery fell 36 cents, or 0.4 percent, to $95.13 a barrel at 9:28 a.m. on the New York Mercantile Exchange. Prices are down 3.7 percent this year.

Storm, Fire

Gasoline rose 0.72 cent, or 0.2 percent, to $3.1075 a gallon on the Nymex, and is up 16 percent this year. Futures closed at $3.1548 on Aug. 27, a four-month high, as Hurricane Isaac forced closures of some refineries in Louisiana and a deadly blast hit Venezuela’s 645,000-barrel-a-day Amuay plant.

Premium gasoline at the pump, averaged nationwide, advanced 3.1 cents to $4.104 a gallon yesterday, up 15 percent this year, according to Heathrow, Florida-based AAA, the largest U.S. motoring group.

U.S. drivers paid less than half the European price and $1.15 per gallon below the world average, according to the Bloomberg ranking.

“Gasoline is relatively cheap in the U.S. but it fluctuates with the market a lot and that’s one of the reasons you hear a lot of complaints,” said Jacob Correll, a Louisville, Kentucky-based analyst at Summit Energy Inc., which manages more than $20 billion in companies’ annual energy spending. “It’s not necessarily the price level. It’s how fast things can change.”

Norway Increase

In Norway, western Europe’s largest crude exporter, the cost of gasoline increased 4.4 percent in July from three months earlier, compared with the 11 percent decline in the U.S.

The Turks spend $9.41, the second-highest price in the ranking. In China, the second-largest oil consumer, the price was $4.89. The Japanese paid $7.15.

India ranked the 44th on the price list with a gallon of premium gasoline costing $5.44. But it’s on the top of the “pain at the pump” ranking, which is measured by the percentage of average daily income needed to buy a gallon of fuel. Norway ranked 52nd and Turkey 6th.

The low gasoline price in the U.S. doesn’t necessarily reduce drivers’ pain as the Americans use more of the fuel than drivers in any other countries, said Correll.

The U.S. used 18.7 million barrels a day of oil in the second quarter, 21 percent of the world’s total consumption, according to the Paris-based International Energy Agency. India, with four times the U.S. population, used 3.74 million. China consumed 9.24 million.

U.S. Consumers

“If you look at just buying one gallon of gas, it really doesn’t hurt us at all, but the problem is a lot of U.S. consumers are buying multiple gallons of gas every single day,” he said. “It’s hard to cut back. You still have to drive to work and you still have to take your kids to school.”

The U.S. is pumping more oil, driven by improvements in technology such as horizontal drilling and hydraulic fracturing, or fracking. Output increased to 6.36 million barrels a day in the week ended July 20, the most since February 1999.

Net petroleum imports are forecast to be 7.29 million barrels a day in 2013, or 39 percent of total consumption, according to the Energy Department. Imports were 11.24 million barrels daily in 2003, or 56 percent of demand.

“We are producing more and importing less, and that’s kind of keeping gasoline prices lower,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas.

The gasoline price list was created by Bloomberg Rankings using data compiled by Bloomberg, Associates for International Research Inc., Europe’s Energy Portal and the International Monetary Fund. Prices for gasoline from the U.S. and European Union countries are as of July 23. All other country prices are from July 9 to July 18.