Wednesday, November 16, 2011

Chart of the Day: Gas Prices in Europe vs. USA


HT: Robert Kuehl

43 Comments:

At 11/16/2011 8:53 AM, Blogger sethstorm said...

Still not a reason to follow their advice. It's a greater reason to require absolute transparency in order to explain the final prices.

 
At 11/16/2011 9:04 AM, Blogger Michael Hoff said...

Stop giving the democrats ideas. "Ooo, lookie! We got lots of room to raise taxes!"

 
At 11/16/2011 9:16 AM, Blogger Hydra said...

This represets gas prices plus tax, not the price of gas, which is approximately the same in Europe as in US.

Their tax structure depends heavily on fuel as a proxy for the economy, and their taxes go directly to the general fund, not to a transportation trust fund, as in the US and most US states.

Which is not to say the trust fund does not get raided, but the intent of gas taxes here is completely different from the european plan.

 
At 11/16/2011 9:55 AM, Blogger Larry G said...

re: " ... taxes go directly to the general fund"

I've never been able to ascertain where the gas taxes in Europe get spent....

is there one or more cites to reflect this?

I had assumed that quite a bit of it went to mass transit but perhaps that's not right either.

 
At 11/16/2011 10:13 AM, Blogger Buddy R Pacifico said...

Hydra states:

"This represets gas prices plus tax, not the price of gas, which is approximately the same in Europe as in US."

Hydra, I don't think that is the case.

Look at the price chart for Russian Gas at the German border. Because this is at the border, the price should be before taxes.

Now look at the price chart for Louisiana Hub natural gas.

The comparison of price charts shows a dramatic divergence of price trends between Europe and U.S.

 
At 11/16/2011 10:23 AM, Blogger Larry G said...

these are gasoline fuel prices... right?

 
At 11/16/2011 10:32 AM, Blogger Buddy R Pacifico said...

"these are gasoline fuel prices... right?"

Oops, thanks Larry and apologies to Hydra. I was conflating the next CD post on nat gas with this post on gas(oline).

 
At 11/16/2011 11:53 AM, Blogger IT STANDS TO REASON said...

So we have a competitive advantage in energy costs across the board. I'm not complaining.

 
At 11/16/2011 12:25 PM, Blogger Benjamin said...

I would like a stiff increase in retail gasoline prices, like 25 cents a year for the next 10 years.

As a property owner, what right do others have to pollute my air and land?

For that matter, Keystone is proposing using eminent domain to ramrod its pipe across private lands. Is that right?

Do property rights count for anything?

 
At 11/16/2011 12:54 PM, Blogger geoih said...

Quote from Benjamin: "I would like a stiff increase in retail gasoline prices, like 25 cents a year for the next 10 years."

Is there a reason why you can't pay an extra 25 cents a gallon now? I'll bet the gas station will take your money.

Maybe what you really mean is you want everybody else to pay more to the state in order to advance some political goal.

 
At 11/16/2011 1:11 PM, Blogger truth or consequences said...

So Benjamin....you bicycle everywhere you go??? you never fly??...you grow your own produce???

 
At 11/16/2011 2:52 PM, Blogger truth or consequences said...

and BTW Benny...doesn't look like you're gonna get your wish (.25 price rise for ten years)....

Enbridge, another "foreign" (LOL) company just bought the Seaway pipeline from Conoco and is going to reverse the flow and send more Cushing oil to the gulf....

the guys who were "scamming" the WTI/Brent spread, the gulf refiners, are seeing their shares plunge today...that "free ride" they were enjoying is on it's last legs.

 
At 11/16/2011 4:19 PM, Blogger Hans said...

Why are these charts used in the first place, since they simply do not compare apple to apple!

This is misleading propaganda and nothing else..

 
At 11/16/2011 6:06 PM, Blogger jeppen said...

Itstandstoreason: "So we have a competitive advantage in energy costs across the board. I'm not complaining."

A country arguably need taxes. Then, the question is which taxes hurt the least. I think the gas tax is such a tax, better than higher taxes on labor for instance.

 
At 11/16/2011 7:22 PM, Blogger JPINTX said...

First question, is this a chart of gasoline prices or natural gas prices.

Since it is stated as a price per gallon and natural gas is priced per mmbtu or per mcf, I think it is a gasoline chart.

Assuming that is true, then the difference is almost 100% tax, with a very small portion as a location differential. The wholesale price for equivalent grades of gasoline are very close worldwide, when they get out of line the arbitrage folks step in and ship to the highest price location. Differences much larger than transportation costs can only exist for very short time periods.

 
At 11/16/2011 7:35 PM, Blogger JPINTX said...

Truth or Consequences,

Only refiners who could buy WTI futures and take delivery have benefited for the large discout WTI has been trading at. Only refiners in PADD III could do this. Gulf coast, for that matter East coast refiners as well, have been paying Brent prices, adjusted for quality and transportation, for quite a long time. So to the extent that anyone was "scamming" it was mid-continent refiners. I have a hard time seeing how it is a scam in a freely traded market that trades about 500,000 contracts per day, that is 500,000,000 barrels or about 5 times worldwide daily consumption of crude oil.

 
At 11/16/2011 8:12 PM, Blogger Hydra said...

Gas being a commodity it is reasonable to assume the market is efficient, without wide divergence in prices.

However, Europe imports more refined products, not crude. One result of this is that they appear to use less energy - the energy used in refining shows up as very high per capita energy use in the refining states.

Europeans are credited with low energy use, but part of their usage is hidden.

 
At 11/16/2011 8:15 PM, Blogger Hydra said...

As a property owner, what right do others have to pollute my air and land?

+++++++++++

As a property owner what right have you got to tell me I can't mix my air with gas and ignite it?

 
At 11/16/2011 10:16 PM, Blogger truth or consequences said...

jpintx....

Gulf Coast refiners use oil delivered by tanker (presumably at Brent price) AS WELL AS a certain amount that comes in from Cushing by pipeline (WTI price, 20-30 dollars lower)....

You think those guys keep really good track and adjust their selling price accordingly? Yeah right?

Oil is not a free market...it's a "strategic commodity" and subject to politics, public perception shaped by huge public relations machines and manipulation by extremely large multinational companies.

They will charge you as much as they can...what it cost them has nothing to do with it.

I love it when people here repeat the Big Oil p.r. line that they only make two cents a gallon....LOL

Just last week Chevron reported Q3..."record profit due to high oil prices"...."profit per barrel: 28.00" or roughly thirty percent. Those are the facts...you can check it out for yourself...it's recent news.

 
At 11/16/2011 10:24 PM, Blogger truth or consequences said...

sorry jpintx...I mad a mistake...

it was 27.00 a barrel....LOL

http://seekingalpha.com/article/303262-chevron-management-discusses-q3-2011-results-earnings-call-transcript

 
At 11/17/2011 4:07 AM, Blogger Ron H. said...

TC: "Oil is not a free market...it's a "strategic commodity" and subject to politics, public perception shaped by huge public relations machines and manipulation by extremely large multinational companies."

But I can freely buy and sell oil from and to pretty much anyone I want, in any amount I wish, at whatever price I agree to pay, right?

Hmm. What isn't free market about that?

"They will charge you as much as they can...what it cost them has nothing to do with it."

And this is as it should be. Do you understand how competition affects prices, and do you not believe people shop for the lowest prices they can get?

"I love it when people here repeat the Big Oil p.r. line that they only make two cents a gallon....LOL"

Well then, how much DO they make?

"Just last week Chevron reported Q3..."record profit due to high oil prices"...."profit per barrel: 28.00" or roughly thirty percent. Those are the facts...you can check it out for yourself...it's recent news."

Yeah, but how much did they make per gallon of gasoline?

 
At 11/17/2011 9:55 AM, Blogger truth or consequences said...

Well, Ron there's what?...forty five gallons in a barrel of oil....27.00 profit....you do the math.

As far as your doubts about me understanding how competition affect prices...I do WHEN there's competetition. I don't believe that is the case here.

Do you understand the laws of supply and demand? How do you explain that the tanks at Cushing have been overflowing for months and months and yet the price of WTI is up over a hundred dollars a barrel...and this just as consumption is dropping? So we have an oversupply along with a shrinking demand and the price is still going up! Yeah sure that "invisible hand" is working just fine here!

 
At 11/17/2011 11:08 AM, Blogger Buddy R Pacifico said...

Truth or Consequences and Ron H.,

Yes, Chevron states they made $27.00 per barrel, BUT...

" In total, our global Upstream earned almost $27 per barrel for the quarter. Based on preliminary competitor results announced to date, we outpaced our nearest competitor by over $5.5. We've now led our peer group on this metric for over 2 years."

So, this was for Upstream, or oil production, and not Downstream, or oil refining to make gasoline.

On oil refining the company stated:

" In summary, we continue to operate safely and reliably and are delivering very competitive financial results. With year-to-date adjusted earnings per barrel of $3.15 ..."

This means they made about 7.5 cents per gallon ($3.15/42 gal) on refined gasoline, or about 2.5% profit, based on $2.90 per gal. average for the period. No?

 
At 11/17/2011 2:06 PM, Blogger Ron H. said...

This comment has been removed by the author.

 
At 11/17/2011 2:30 PM, Blogger Ron H. said...

TC: "Well, Ron there's what?...forty five gallons in a barrel of oil....27.00 profit....you do the math."

Well no, there are 42gal/bbl I can see why you are having trouble.

OK, I'll do the math...Hmm - that's $0.61/gal profit - for upstream oil.

I believe there are some additional processes required, that impose additional costs, before we can discuss profit on a gallon of gasoline.

Out of courtesy, you should thank Buddy for handing you the correct answer.

He also has a clear understanding of the concepts of competition and supply and demand as they apply to the oil industry. He may be willing to explain them to you if you ask him. It's clear that you're missing some pieces of the whole picture there also.

 
At 11/17/2011 2:32 PM, Blogger Ron H. said...

Buddy: "Truth or Consequences and Ron H.,

Yes, Chevron states they made $27.00 per barrel, BUT...
"

Thanks for the clear explanation, Buddy. I was hoping to force TorC to realize there were a couple of steps missing in his calculations.

He finds it easy to laugh at things about which he has no clue.

 
At 11/17/2011 5:53 PM, Blogger VangelV said...

I've never been able to ascertain where the gas taxes in Europe get spent....

Same as in the US. They mostly go to general funding.

 
At 11/17/2011 6:02 PM, Blogger Larry G said...

gas taxes in the US do not go to the general fund. they go to the transportation trust fund.

In fact, about 30 billion more comes FROM the general fund to spend on transportation.

http://en.wikipedia.org/wiki/Highway_Trust_Fund

got any specific links for European gas tax revenues and what they get spent on?

 
At 11/17/2011 7:01 PM, Blogger JPINTX said...

Truth or C

Movement of crude from PADD 2 (mid continent, including cushing) to PADD 3 (tx, la,ark, nm, including the gulf coast) is difficult but you are correct, some does take place, is it meaningful? Well for the latest month for which data is available, only if you see 2.5% of the total as meaningful. August 2011, 193mbd out of crude runs of 7,937mbd. That is typical.

 
At 11/17/2011 10:09 PM, Blogger Buddy R Pacifico said...

Hey Ron H, you wrote:

"Out of courtesy, you should thank Buddy for handing you the correct answer.

He also has a clear understanding of the concepts of competition and supply and demand as they apply to the oil industry."


I have to admit I don't have broad knowledge of the oil industry. I simply read the rest of the transcript of the Chevron earnings call. Chevron is doing really well, but even they don't make much on gasoline.

 
At 11/17/2011 10:32 PM, Blogger Ron H. said...

Buddy: "I have to admit I don't have broad knowledge of the oil industry. I simply read the rest of the transcript of the Chevron earnings call. Chevron is doing really well, but even they don't make much on gasoline."

That's OK, Your understanding of supply and demand, and of the role of competition, when applied to the oil industry provides you with good conclusions, unlike our friend, who doesn't hesitate to express opinions on things he doesn't understand.

 
At 11/18/2011 9:23 AM, Blogger VangelV said...

gas taxes in the US do not go to the general fund. they go to the transportation trust fund.

No they do not. The fund gives the money to the US government and gets back non-marketable IOUs in return. The money is spent on general operations.

 
At 11/18/2011 10:36 AM, Blogger Larry G said...

the transportation trust fund is credited with the amount of gas tax received - and more important - it cashes the treasury notes and spend it - ONLY for transportation projects.

the trust fund is just like a checking account with a balance and the DOT can and does write checks and funds projects from that balance.

what you said is only half correct and if you leave it at that without adding what I did above (the rest of the story).

ALL monies collected for ANY of the trust funds (over 100) go through this process of crediting the account, receiver treasury notes that then are redeemed later and spent but only to the amount of treasury notes that are held - usually.

In the case of the transportation trust fund - they not only spend every penny received in gas taxes, they are then appropriated about 30 billion more from the general revenues.

In other words they use the general revenues not the other way around.

 
At 11/18/2011 11:02 AM, Blogger VangelV said...

the transportation trust fund is credited with the amount of gas tax received - and more important - it cashes the treasury notes and spend it - ONLY for transportation projects.

First, the money is gone. It has been spent on general operations. What is left are IOUs and the typical monthly tax revenues that is yet to be sent to Treasury.

Second, some of the cash that is not given to Treasury is spent to subsidize inefficient public transit systems, not fix the roads, bridges, etc., that the drivers who pay the taxes use.

the trust fund is just like a checking account with a balance and the DOT can and does write checks and funds projects from that balance.

Except for the fact that it has no money in it it is just like a checking account. I don't know about you but my bank does not accept IOUs in checking accounts.

 
At 11/18/2011 1:54 PM, Blogger Larry G said...

First, the money is gone. It has been spent on general operations. What is left are IOUs and the typical monthly tax revenues that is yet to be sent to Treasury.

the money...like the money in your own checkbook is fungible.

you may receive some money and dedicate it to some particular use but you likely will use the same checking out and "remember" that you have put that money in there for a purpose and to not spend it for other purposes.

"Second, some of the cash that is not given to Treasury is spent to subsidize inefficient public transit systems, not fix the roads, bridges, etc., that the drivers who pay the taxes use."

3 cents per gallon gets dedicated to transit - but I don't disagree with your view in large part.

"Except for the fact that it has no money in it it is just like a checking account. I don't know about you but my bank does not accept IOUs in checking accounts."

agreed but that's the way govt (and private sector) work.

otherwise, how could a company report millions in losses but continue to operate?

 
At 11/18/2011 4:53 PM, Blogger VangelV said...

the money...like the money in your own checkbook is fungible

There is no money in the trust funds. All there is are IOUs. The same as in the government employee pension trust funds, SS trust funds, etc.

you may receive some money and dedicate it to some particular use but you likely will use the same checking out and "remember" that you have put that money in there for a purpose and to not spend it for other purposes.

If the money was taken by your friends who spent it on booze and hookers his IOUs are not the same as money in your account. We have already argued about this before.

agreed but that's the way govt (and private sector) work.

Correct. The government already spent the money on general operations. That is the way things work.

 
At 11/18/2011 5:37 PM, Blogger Larry G said...

"There is no money in the trust funds. All there is are IOUs. The same as in the government employee pension trust funds, SS trust funds, etc."

there is nothing but IOUs in your own checking account - redeemable upon demand.

"If the money was taken by your friends who spent it on booze and hookers his IOUs are not the same as money in your account. We have already argued about this before."

if your friends spent it to save their life but still owed it to you and paid it back upon demand.... then what?

characterizing the money as "wasted" derails the real issue.
it may or may not be wasted ...a subjective view.. but that does not change how it works.

"Correct. The government already spent the money on general operations. That is the way things work."

what happens when a private sector company spends money it does not have and encounters a loss - but does not go bankrupt?

you don't like the idea of the govt have one giant fund upon which all receipts whether gas taxes or FICA taxes goes and then checks written for other purposes - but those IOUs are redeemable upon demand - for cash - and have always been paid and if they are not - it will also affect the value of treasuries sold to the public.

when it says "full faith and credit" it does mean something.

most countries in the world - and many private sector companies do business this way.

they both run debt....

you run debt....when you get a loan - to be paid back in the future.

you do not have enough money in your checking account to cover your liabilities - either (at least most don't).

 
At 11/18/2011 8:24 PM, Blogger Ron H. said...

"otherwise, how could a company report millions in losses but continue to operate?"

Without a cash reserve, I believe they execute a procedure called "borrowing".

 
At 11/18/2011 9:10 PM, Blogger Larry G said...

Without a cash reserve, I believe they execute a procedure called "borrowing"

uh huh...

and with the govt it's called selling treasury notes to cover general fund expenditures plus paying back trust fund IOUs.

we do this also as citizens - with mortgages, equity loans... car loans, education loans, etc.. even operating expenses.

what's the proper metric for govt borrowing - as a percent of revenue?





I've hardly heard anyone say that people should save up for their homes (old school) rather than owing money for 30+ years.

 
At 11/18/2011 9:45 PM, Blogger VangelV said...

there is nothing but IOUs in your own checking account - redeemable upon demand.

Really? How do you demand repayment when GAAP accounting shows a deficit close to $5 trillion a year? Higher taxes are certainly out. SS and Medicare have higher priority. So do government employee pensions, defense, etc. The fact is that there is no money to repay all that was taken out and spent and not all of the IOUs can be redeemed.

if your friends spent it to save their life but still owed it to you and paid it back upon demand.... then what?

But they can't pay it back because the hookers and bartenders won't give it back and they have massive debts that have to also be repaid. You seem to forget the national debt, the deficit, and the unfunded liabilities and think that any trust fund that needs cash will get it. But that can't happen. The trust funds supposedly run by the government hold around $5 trillion in IOUs.

what happens when a private sector company spends money it does not have and encounters a loss - but does not go bankrupt?

If a private company borrows money and takes a loss it has to keep borrowing. If it has too much debt it will not be able to service its debts and will be forced into bankruptcy.

you don't like the idea of the govt have one giant fund upon which all receipts whether gas taxes or FICA taxes goes and then checks written for other purposes - but those IOUs are redeemable upon demand - for cash - and have always been paid and if they are not - it will also affect the value of treasuries sold to the public.

They are not redeemable because the government runs huge deficits. It does not have the cash to repay those funds and can only transfer money to them as long as it can keep borrowing. That is not a problem as long as you believe that the borrowing can continue forever. But in the real world it can't. A $15 trillion economy cannot handle $15 trillion in federal government debt and $100+ trillion in unfunded liabilities.

characterizing the money as "wasted" derails the real issue.
it may or may not be wasted ...a subjective view.. but that does not change how it works.


Correct. There is no money to pay back any of the funds. If they want some money the Treasury has to borrow even more. Given the huge debt load that won't be easy to do for much longer.

 
At 11/18/2011 10:58 PM, Blogger Larry G said...

"Really? How do you demand repayment when GAAP accounting shows a deficit close to $5 trillion a year? Higher taxes are certainly out. SS and Medicare have higher priority. So do government employee pensions, defense, etc. The fact is that there is no money to repay all that was taken out and spent and not all of the IOUs can be redeemed."

but they are - so far... in fact because of the mess in Europe it's even EASIER to sell US Treasury notes, right?

"But they can't pay it back because the hookers and bartenders won't give it back and they have massive debts that have to also be repaid. You seem to forget the national debt, the deficit, and the unfunded liabilities and think that any trust fund that needs cash will get it. But that can't happen. The trust funds supposedly run by the government hold around $5 trillion in IOUs."

unfunded liabilities are FUTURE debt not current liabilities not current ones they have nothing to do with the current status.

we do indeed have a 1.3 trillion annual deficit - as much as we take in in income taxes but we have DOUBLED the DOD expenditures since 2000 and have CUT TAXES at the same time.

if you went back to 2000 and used the tax rates in effect then and rolled back DOD expenditures - we'd have a lot less deficit.

"what happens when a private sector company spends money it does not have and encounters a loss - but does not go bankrupt?

If a private company borrows money and takes a loss it has to keep borrowing. If it has too much debt it will not be able to service its debts and will be forced into bankruptcy."

but many companies that have losses do not go bankrupt. how can that be?


"you don't like the idea of the govt have one giant fund upon which all receipts whether gas taxes or FICA taxes goes and then checks written for other purposes - but those IOUs are redeemable upon demand - for cash - and have always been paid and if they are not - it will also affect the value of treasuries sold to the public.

They are not redeemable because the government runs huge deficits."

they are. the US govt sells treasury notes to come up with the money... right?

"It does not have the cash to repay those funds and can only transfer money to them as long as it can keep borrowing. That is not a problem as long as you believe that the borrowing can continue forever."

"forever"? ha ha ha. EVEN Ron Pauls draconian balanced budget does not balance for 5 years at which point the 14 trillion debt will double.


"But in the real world it can't. A $15 trillion economy cannot handle $15 trillion in federal government debt and $100+ trillion in unfunded liabilities. "

I agree but you simple cannot have a DOD that costs twice as much as it did i 2000 and at the same time cut taxes.


"characterizing the money as "wasted" derails the real issue.
it may or may not be wasted ...a subjective view.. but that does not change how it works.

Correct. There is no money to pay back any of the funds. If they want some money the Treasury has to borrow even more. Given the huge debt load that won't be easy to do for much longer."

as long as Europe is a mess...the irony is US Treasury notes are highly sought after - to the point where they pay almost no interest.

the safest investment you can put your money in now days is...U.S. Treasury notes.

 
At 11/19/2011 3:59 AM, Blogger Ron H. said...

"unfunded liabilities are FUTURE debt not current liabilities not current ones they have nothing to do with the current status."

There is is again! recite 100 times: NPV, NPV, ...

 
At 11/19/2011 11:14 PM, Blogger VangelV said...

but they are - so far... in fact because of the mess in Europe it's even EASIER to sell US Treasury notes, right?

Of course. With Europe collapsing money managers are running to the USD. But the problem is that the US debt problems are bigger than Greece or Italy and the EU does not have a massive military that consumes a huge amount of capital every year. European nations are used to defaults and collapses. They are used to worthless currencies being replaced by new ones and starting over again. Americans aren't. If the USD falls, as it will, their empire will have to pull back and they will have to start paying for their consumption with something more than newly printed fiat money.

unfunded liabilities are FUTURE debt not current liabilities not current ones they have nothing to do with the current status.

The deficit, if we use GAAP accounting, is close to $5 trillion a year. That means that the lack of funding becomes material when the UST markets turn. You could see a huge crisis happen very quickly and a collapse of the entire US financial and social security system. Imagine being a federal employee who gets enough money each month to buy a bag of groceries. If you don't have real savings how do you ever recover?

 

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