The recent rise in the average American gas price seems unusual and out of line with international trends. I've generated a few graphs to investigate, but have no real answers. Is there a legitimate basis for the increase, or are consumers being gouged? Please read on and have your say.
[First, a hat tip and thanks to user paradox for a diary Relentlessly Rising Food & Gas Prices Batter American Consumer a few hours ago that prompted me to grab some data, generate a few graphs and write this.]
A few diaries back, on May 7, I wrote a diary America and gasoline: myths and reality (it got much more exposure here than my usual 10-comment diaries, getting 350+ comments and making the rec list) where I pointed out that there are developed nations which have high per-person transport sector needs like the USA but use only 50-60% of American per-capita oil consumption - the greatest differential factor being engine sizes and average fuel economy.
I didn't write that to advocate for European-level gas taxes, as I agree that a high at-the-pump gas tax would have far more harmful effects on low income Americans than it has on Europeans. Instead of a gas tax, I favor a road user charge, believing that it can be much better than a flat gas tax at discouraging high use in those who can make reductions, targeting those who can afford to pay it, and rewarding those who make smart vehicle choices. (I wrote a diary about road user charges vs gas taxes back in February, and may revise it sometime.)
Even without gas tax hikes or road user charges, Americans are feeling the pressure of increased prices. Inflation has been understated with (in my opinion deliberately) misleading measurement for most of the Bush administration's rule, and people on lower incomes are being hurt the most. I want to look at the recent gas price rises in the United States in particular. They appear to be unusual and different to past rises. I really don't know why, so this diary has questions with few answers.
First, a graph I generated from data at the US DOE website. It shows the average weekly regular gasoline price since the start of 2001, when the current Administration took over.
A relatively stable period of $1.50-$2.00 prices from 2001 to 2004 has been replaced since 2005 with a $2-$3 price with a peak centered around late summer. The peak became a large plateau in 2006, and it appears to have started again in 2007.
For better comparison of times within each year, here is another graph from the same data.
Now we can see that so far, the 2007 trend is following 2006 closely, if perhaps starting a little earlier and a little stronger.
The problem is, this recent 2007 spike is not in line with international prices. I've decided to use the "All Countries Spot Price FOB Weighted by Estimated Export Volume" data from the DOE. By that and any other fixed world oil measure, the world oil price at the start of May 2007 is 5% lower than in May 2006. Many at-the-pump prices outside the USA are lower now than this time last year. (Down under, I am now paying 9% less than May last year, partly due to a lower world oil price and partly because of a stronger local currency.)
To compare US gas prices with the cost of crude oil, I generated the following graph. It shows the weekly gas price (cents per barrel) divided by the crude oil price (dollars per barrel) for each week. Over long periods with great fluctuation in the crude oil price, this is a fairly misleading statistic because of fixed costs and taxes. To mitigate that, I've only shown the data for 2006 and 2007. In this period, the crude oil price has been relatively "stable" in a $55-$70 range. (Including 2005 would have skewed the results since that year had a $35 to $60 range.)
[UPDATE: Just saw a new weekly value added, so here is a new version of this chart with data for the week ended May 14 rather than May 7.]
It's apparent that since oil has been at $55-$70 a barrel, the normal American ratio range has been 4.0 to 4.5. But for the past few weeks, there has been a sudden jump well past 4.5. [UPDATE: The latest May data now shows it has almost reached 5.0, a significant shift for a measure that has been steadily in the range 3.9 to 4.5 for more than 18 months.]
Now, it is important to not read too much into this measure, because the interaction between world crude prices and US at-the-pump prices is a complex one: each affects the other, and there are also lag effects and speculation influences. Despite that, the graph is useful and shows a trend I can't explain. Perhaps the ratio will settle back to its normal range when the world crude price catches up with American supply pressure influences. Or, perhaps the ratio is moving to a new long-term normal range for the current situation of continued high US demand and strains on supply.
It could be that the higher price is a result of neglect of American refining infrastructure, with the industry delaying necessary work to collect profits and now passing costs on to the consumer. Or maybe they're just making a quick extra buck at the expense of Mr and Mrs Commuter.
Like I wrote at the start, I'm full of questions but short on answers here. I hope people with more knowledge than myself will stop by and leave a comment or two.