After months of wondering why Americans are always complaining about petrol prices, I finally figured out why.

This might seem obvious to some, but the solution everyone seems to come up with seems pretty stupid to me. To start with, let’s compare fuel prices in a few countries (unleaded fuel, at the bowser):

  • US fuel price: around $4/gallon (1)
  • Australia: about $1.65/L
  • UK: about £1.18/L (2)
  • France: about €1.40/L (3)

Just to compare, let’s change that to US$/Litre (1 US gallon  = 3.7 litres, Exchange rates from http://www.xe.com/ucc/):

  • US: $1.08/L
  • Aus: $1.57/L
  • UK: $2.32/L
  • Fr: $2.19/L

Of course, these calculations could be off a fair bit, but with a difference like that, the error couldn’t be very sginificant.

From that, you can see why I was confused: Americans have some of the cheapest fuel in the industrialised world. It certainly isn’t anything to scream about. In fact, with peak oil almost certainly hitting around now (The actual centre of the peak being somewhere between a couple of years ago, to perhaps a few years ahead), it more like something to just get used to. It certainly isn’t going to get cheaper for any significant period of time.

But then I realised that there was another factor: Wages. If americans are earning less than us here in Aus, then the fuel is obviously costing them relatively more. So let’s see average weekly wages for the four countries:

  • US: $600.80 (4)
  • Aus: $1008.10 (5)
  • UK: About £460 (from average yearly estimate wage of $24000)
  • Fr: ???

And compared to fuel costs:

country fuel cost
(100L)
weekly wage 100L as % of
weekly wage
USA $108 $600.80 18%
Australia $165 $1008.10 16%
United Kingdom £118 £460 25%

Which is obviously the reason why americans currently care more about fuel than australians. This is obviously going to be compounded by wage inequality – the average wage is a pretty stupid measure of income, because the richest few people make the average wage higher than the vast majority will ever earn. Looking at a median wage is a far better way to do it, and if that was done, and considering that america seems to have worst income inequality than most industrialised nations, that percentage, compared to australia would be much higher than it is above, both absolutely, and relative to the other countries.

But what about the UK? Why aren’t they going nuts about fuel prices? Even if their income inequality is far less that the US, they probably still have a higher fuel price compared to wages. The answer is obvious: they spend less money on fuel because they buy less fuel. There are two reasons for this: the UK is a more compact country than the US – people don’t need to drive as far when they do drive. But more importantly, both for its impact, and for its potential for change, is public transport. Most of the US, by all accounts, has a terrible, or even non-existant public transport service. New York has the metro, and San Francisco has it’s trams, but most other cities are designed almost exclusively for cars – in some it’s hard to even walk any where. When you’re forced to drive a car to get to work, school, or anywhere else, you’re going to feel the fuel crunch pretty hard.

Americans do have a fuel problem, but calling for lower prices isn’t going to help in the long run. Peak oil means that fuel prices are on a roughly exponentially increasing path – even if we knock 20 cents off now, it’ll only be a matter of months, a couple of years at the most, before it’s back where it was again. If you want a solution to fuel prices, then call for a decent minimum wage (the american minimum wage is far less than the australian minimum wage, and was even when the australian dollar was at US$0.55 a few years ago. Now it’s well under half). If you want to do something permanent about making transport cheaper, then call for real public transport systems, especially electricity driven public trasnport, like trains, trams, and street cars. That’s going to be just about your only livable way out of this mess.

Sources:

  1. http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
  2. http://www.petrolprices.com/
  3. http://www.prix-carburants.gouv.fr
  4. http://www.bls.gov/news.release/empsit.nr0.htm
  5. http://www.smh.com.au/articles/2005/08/18/1123958181797.html