While you contemplate the full misery that this sad state of affairs inflicts upon the average UK motorist, eating into what's laughing called their after-tax income, consider this factoid. At various times in the last three years, the UK was an oil exporter. So why the masochism at the pump? Hey, you try running a socialist country– whose population's roughly equal to California and Texas combined– on just £552b per year. The bottom line: taxes. Pistonheads reports that "Duty on both petrol and diesel is now 50.3p a litre – around 40% of the total cost at the pumps. The duty on champagne is said to be £1.87 a bottle, which means that on a £20 bottle the duty makes up roughly less than 10%…. Polls have shown that more than half the population now blame the Government for the spiralling cost of fuel." So what's a government faced with disgruntled (disgruntled I tell you) motorists to do? Raise the fuel duty by .2p per [imperial] gallon. PH commentator 109 Bob shows how cynical UK subjects have become. "What bloody difference will it make by scrapping the 2p increase that is planned. What difference would it make if 10p was to be taken off duty, absolutely no difference what so ever to me our you. The decrease in price would just get swallowed up & prices will continue to increase." Yes they're mad as Hell and they're gonna take it some more.
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As pointed out by many, one cannot just take the price in pounds, use currency exchange rates, and get what folks in the UK are “really” paying for anything in terms of dollars. So maybe U.K. diesel costs someone dealing in (or getting paid in) dollars $9.84 per gallon. However, the real purchasing power of the pound in the UK is about the same as purchasing price of the dollar in the US. For example, Big mac = $3 in US, or 3 pounds in the UK. Further, British people are not generally paid half of what Americans are paid, to accord with exchange rates. In order for that $9.84 figure to mean anything, that would mean that diesel would have to be around 2 “quid” — rather than 1.32/litre as the article states.
Well, Detroit, I’ve lived in the UK and can tell you that for the average working folks (comprising 90% of the population), their standard of living is lower than the US, and at least when I lived there and have visited there, I’ve found that while things may have similar price numbers (a $2 item may cost 2 pounds in the UK, for example), the approximately 1.95 to 1 conversion rate really makes the equivalent UK price to be nearly $4. Both in purchasing power for Americans visiting, and for Brits living there.
Because, trust me when I tell you, pay for British folks is NOT equivelent in numbers (just put a pound sign in front instead of a dollar sign), and taxation is significantly higher, too.
So yeah, $9.84 a gallon is a major owwwwie.
Hence the Brits don’t tend to drive F350’s like that wally who couldn’t stand to be behind me this morning on my commute then commenced to tailgate the heck out of all and sundry – until I kept catching up to him at red lights (in my Prius). Yeah, I laughed at him (but locked the doors when I did, just in case).
This what I’ve never understood about this fair country of mine. In that BBC link provided, there’s a statement which baffles me:
This is the first time that the UK has exported more crude oil than it has imported since March 2005.
Why would you export your oil only to import oil? Surely, you would keep hold of what you need for your country and export what you don’t need or import what you do need.
Anyway, back to the UK motorist. I like our socialist economy. It provides everyone a certain standard of living. I like having the NHS. It works and I like it.
The bit which messes the whole thing up is (you guessed it) the government. At the moment, there is a huge uproar about MP’s comitting fraud on their expenses, the war in Iraq that no-one wanted, MP’s spending money on cars made abroad rather than buying cars built in the UK, thus helping the trade deficit. Really the list goes on. So until all these problems are sorted (which could take years) they have to raise taxes….again!
But to say it’s all the government is unfair. I’ve lost count how when the price of oil goes up, the petrol prices goes up the NEXT DAY! But when the price of oil goes down by about $10, petrol prices stay the same! Then, at the end of the year, BP, Shell and ExxonMobil announce record profits “on the back of rising oil prices”. Ask yourself this:
If petrol prices are rising to cover the rising price of oil, how can oil companies be profiting? They’re just passing on the cost surely? Their revenues would increase, but their profits would stay the same…..
Menno — I agree that UK gas prices are definitely expensive relative to income. However, if you take household purchasing power (http://en.wikipedia.org/wiki/Median_household_income) the U.S. is at $48,000 and the U.K. $39,0000, so only a 20% difference. So leaving aside the propriety of doing straight pounds to dollar conversions, many goods in the U.K. (not just daily consumer products but worldwide expensive commodities likes cars) are priced very similarly to dollars. The Vauxhall Astra and Saturn Astra are VERY close when you just switch the currency sign. The difference in purchasing power may mean that the average U.K. citizen may pay about 20% “more” for a comparable good in their home county. But that is all somewhat murky given VATs and such.
However, not being an economist, I would defer to the experts. Maybe, take the price in pounds, add 20%, and switch the currency signs to get a sense of what British people are “really” paying in a dollar comparison.
As Mr. Farago points out, a huge culprit is the taxation European governments place on a litre of fuel.
Good post, Detroit and also Katie, of course (being that you’re right there in the UK, Katie, we should obviously have expected you to have a good sense of this situation).
Yes, I think the “gap” between standard of living between Brits and ‘mercuns is a lot closer than it was – and to be honest, I think that it is dropping for both relative to other 1st world nations, but the US is dropping faster, making the UK look relatively better off. For now.
But I read some rather interesting tid-bits in places like
http://www.dailyreckoning.com/index.html
and some of these guys figure that the UK still has some distance to fall, with standard of living, because the per-person debt is even higher than America’s is.
I can concur with that possibility; when we lived in the UK 22 to 15 years ago, I distinctly recall many of the other families living in our neighborhood, spending 2000 pounds PER CHILD on Christmas gifts (all “on tick” – on their credit cards). We did not and our kids didn’t “suffer.”
I also distinctly recall paying 21% APR on a new car loan, in 1990, as well. That was after having lived in the UK for four years. So I had established credit (and owned a home), had a reasonably good job.
So it’s not just “income for income” but also the interest rates and taxation rates which really hurt compared to America.
Anyway, back to the UK motorist. I like our socialist economy.
Then as far as I’m concerned, you get what you pay (through the nose) for.
If petrol prices are rising to cover the rising price of oil, how can oil companies be profiting? They’re just passing on the cost surely? Their revenues would increase, but their profits would stay the same…..
Then they must be selling more of it or speculation is up or OPEC isn’t producing as much or the GBP is weakening or the subsidies on gasoline across the world are keeping demand artificially high or something that makes more logical sense than just saying “Big Oil’z rapn me”.
Let me guess, you’re one of those that think by taxing the hell out of oil profits it won’t lead to less production and even higher oil (and therefore gas prices) despite basic economics…oh, wait. I forgot. The Dems are going to nationalize the refineries or the entire industry. Greaaaaat. Now we can see our government find some way to lose money in the oil industry. That’s what happens when people need to find a villain. Government does what it does best…overreact.
Why would you export your oil only to import oil? Surely, you would keep hold of what you need for your country and export what you don’t need or import what you do need.
Different oils have different content. I believe North Sea oil has more stuff usefull for power stations, while Saudi stuff has more petroleum.
UK – Socialist economy!
Gordon Brown has increased indirect taxation at every opportunity over the last decade and lowered direct taxation; this effectively places the tax burden on the people with the lowest income.
This winter we’re going to have many old (and a few young) deciding whether to heat their home or eat.
This government is hurting the whole country; especially the working classes that have historically supported it.
Fuel taxation is effectively a tax on rural Britain as well – it’s all very well taking a bus if you live in a city but out in the country getting the one bus a day into town is not an effective solution to anybody.
Finally, Kate – I like the NHS but haven’t you noticed the Labour government slowly strangling the life out of it.
This government is neither Socialist or useful.
An interesting question is: Why is the UK no longer an oil exporter? The answer: declining production in the North Sea.
Take a look at this graph:
http://www.theoildrum.com/uploads/12/north_sea_bp.png
Production is down about 40%. 40%! That hurts.
Now, oil is drilled worldwide and is fungible, but losing more than 1 million barrels per day is greater than 1% of total worldwide capacity.
For all those who say ‘but there’s lots of oil left’ it’s not as simple as that. First actual, liquid, oil is becoming harder to find. Things like tar sand and oil shale are oil equivalents which require lots of processing before they can even be refined.
Second, and more relevant to this conversation, is: what price are you willing to pay for what’s left? As I said, it is getting harder to find. Maybe you’ve heard about the “jack” oil field in the Gulf of Mexico. The oil is 28,000 feet below the sea floor. The sea floor is 7,000 feet below the sea surface. Yes – that’s over 6.5 MILES below the surface of the water. Just to get to it. Then a pipeline has to be built to get it to shore. Then it has to be refined. Then it has to be trucked to a gas station. Then you get to buy it.
And you want all that for $2 or $3 per gallon? Think of the work that goes into it. Open your eyes. Do you think that the oil companies would be drilling in these waters, going to these lengths, if they didn’t have to? If there was oil that is much easier to get to?
Again – open your eyes. Regardless of whether or not we’re running out of oil, we’ve already run out of CHEAP oil. Get used to these prices.
What’s the cost of “chip fat” per litre these days in Old Blighty?
–chuck
http://chuck.goolsbee.org
Taxes represent on average 35-percent of the Canadian pump price, versus 20-percent in the US. Ontario gasoline is about $5.50 per US gallon today.
Canada employs 60-percent more civil servants per capita than England and the USA with three and ten times our population respectively. Fifty percent of our people support the 25-percent employed by government at premium wages and benefits.
A socialist government’s goal is to make everybody equally poor. If it moves, they tax it. If it keeps moving, they regulate it. If it stops moving, they subsidize it.
Re: oil company profits, the cost of *producing* oil has not gone up, only the cost of a barrel of oil in the marketplace.
As the cost of oil goes up, the profit margin on low cost oil will (of course) increase. On the bright side, production on marginal fields (where the cost of production is higher) will also increase, as there will be sufficient motivation to drill there… Which should keep oil prices from going too high for quite some time.
And, after living in the UK for two years, it feels like everything is about a third more expensive than in the bay area, regardless of the actual exchange rate.
I would definitely be a drunk living there. Well, it would be cheaper then driving! LOL
The only oil companies that are making astounding profits are those that sell crude. The ones that ONLY buy crude, refine it, and sell the gasoline are the small guys (Tesoro, Valero, 66, Sinclair, etc)…they’re getting pinched hard right now as their profits have only decreased due to crude prices as well as tax increases.
Why do you think ExxonMobil is getting out of the gas-selling business…leaving it to retailers to take the hit.
The only oil companies that are making astounding profits are those that sell crude.
Absolutely right, and not well-known by the public. The reason the giants (Exxon/Mobil, BP, Shell) have such large profits is that they are not paying $135/barrel for their crude. The smaller oil companies and refiners may be just hanging on with little profit if they’re paying full market prices for oil.
What is never discussed is how, at the retail level, gasoline and diesel end up selling for approximately the same price in any given region, regardless of the cost of the crude. If Exxon refines domestic oil that cost them $10-$20/barrel, that low crude price is not passed on to consumers. Everyone pays at the pricing structure of the most expensive refiner who bought on the spot market.
The only oil companies that are making astounding profits are those that sell crude.
Absolutely right, and not well-known by the public. The reason the giants (Exxon/Mobil, BP, Shell) have such large profits is that they are not paying $135/barrel for their crude. The smaller oil companies and refiners may be just hanging on with little profit if they’re paying full market prices for oil.
What is never discussed is how, at the retail level, gasoline and diesel end up selling for approximately the same price in any given region, regardless of the cost of the crude. If Exxon refines domestic oil that cost them $10-$20/barrel, that low crude price is not passed on to consumers. Everyone pays at the pricing structure of the most expensive refiner who bought on the spot market.
Why do many Americans seem delight in referring to many countries as socialist? I’m guessing uniform access to health care is what gets a nation labelled as “socialist” as you wag your finger at Canada too. Heavily taxed gasoline is pretty much a standard practice across Europe, and is just as much intended to promote conservation and limit pollution as it is to pay for each of its citizens right to healthcare etc.
Socialism is a lot more than just what day of the year Tax Freedom Day arrives.
The only oil companies that are making astounding profits are those that sell crude.
Absolutely right, and not well-known by the public. The reason the giants (Exxon/Mobil, BP, Shell)
have such large profits is that they are not paying $135/barrel for their crude. The smaller oil
companies and refiners may be just hanging on with little profit if they’re paying full market prices
for oil.
What is never discussed is how, at the retail level, gasoline and diesel end up selling for
approximately the same price in any given region, regardless of the cost of the crude. If Exxon refines
domestic oil that cost them $10-$20/barrel, that low crude price is not passed on to consumers.
Everyone pays at the pricing structure of the most expensive refiner who bought on the spot market.
Yep…and you learn about alot of those things when you come from a 3-generation oil company family (Texaco and then Sinclair). And then you see alot of similiarities when you work (consult) in the power/electrical energy industry.
And hear very similiar complaining from consumers and clients (providers) about rates and taxes.
They get free health care, generous welfare benefits, all that good stuff. Cost money.
A few years ago when oil was 13 a barrel it was a pretty simple matter to pile on loads of taxes per liter. Now that crude oil is 1000% more they are stuck with high taxes and high supply costs. Serves them right. They voted for these people.
So the government takes $5 bucks on every gallon and provides lousy health care. The funniest part is they then blame it on ‘Evill Big Oil’ and people are actually stupid enough to buy into that.
Winston Churchill
“A 5 minute conversation with the average voter is the best argument against democracy”
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Those taxes, and especially the things they’ve paid for and the development patterns they spawned, also mean that the typical person in the UK doesn’t “neeeeeed” to drive a SUV 20,000 miles per year to hold down a job. You can measure percentage of income spent on transportation, and I bet you the typical UK resident comes out way ahead.
As a UK student, who doesn’t drive (got me a licence, but also a train driver father which equals free public transport in the city) and doesn’t pay council tax, and hasn’t used the NHS for a while, you’re all getting me very worried now…
But having said that, all of the major political parties in the UK are FOR taxing cars and encouraging public transport etc, so don’t start with your ‘Well you get what you voted for’ crap…
Why do many Americans seem delight in referring to many countries as socialist?
We take our status as a capitalist country seriously, I think. We don’t like high taxes. (The very thought makes me think Boston Tea Party) We don’t like paying for welfare or other people’s healthcare, because we know it’ll get wasted. We’re not as gung ho about Big Government as Western Europe seems to be. That’s why I say Britons who complain about high gas prices only have themselves to blame. It doesn’t have to be that way.
Americans pay for their health care just the same. Just ask Detroit what they think about private health care. Private health care is fueling the export of American jobs to countries where corporations don’t have to pay for overpriced health care. America remains the only first world country without universal health coverage.
I am not sure why Americans delight in their lower taxes. Isn’t that the primary reason so many people drive SUVs and the such, even when it damages the state of your nation?
I hope the price of oil triples so I don’t have to deal with the proles taking up valuable bumper room on the highway.
Presumably if the US had something equivalent to the NHS, the shrinking 2.8 wouldn’t have to take care of their employees healthcare.
Carshark
We take our status as a capitalist country seriously, I think.
Oh puh-leeez! Do Capitalist economies bolster their steel industry by imposing illegal (under WTO rules) tarrifs against foreign steel?
Even now, people are thinking about bailing the big 2.801.
The United States are Capitalist when it suits them and socialist when it suits them.
That huge hi-tech Military you all seem to be so proud of – who pays for that? The War Fairy?