Much ink has been spilled over the continuing oil price crash and its effect on the global economy.
But for the average person on the street, the crash hasn’t had a particularly visible effect on life, with much of the oil shock absorbed by consumer goods producers.
However, there is one area where Joe Public notices the changing price of oil, and that’s in the price of fuel, most notably the cost of petrol, or gasoline as its known.
Since oil prices started to fall, so too have fuel prices globally. Petrol doesn’t cost the same everywhere in the world though, with everything from taxation to the number of vehicles on the roads affecting the cost consumers pay at the pump.
One chart from investment research firm Bernstein, shows just how wildly prices for petrol vary across the globe. There’s good news if you’re a consumer in the USA, where prices are notoriously low. Across the pond in the UK, things are a little more expensive, with British petrol prices the most expensive of any country in the Western world. Here’s the chart:
Brits pay such huge prices for fuel because of substantial taxes, in the form of VAT and fuel duty. Fuel duty in Britain is £0.58 per litre, while in the USA, excise taxes are just $0.18 per gallon on gasoline. That works out at just over £0.04 per litre. These tax differences go a long way to explaining price differences, although there are other variables.
As Bernstein notes (emphasis ours):
Changes in gasoline prices usually track changes in crude oil prices, although the relationship is complicated by taxation, currency movements, (the dollar and oil tend to be correlated), and subsidies. Globally, gasoline prices tend to follow a similar trend, although prices can range from US$0.5/litre (in the United States) to US$1.5/litre (in Europe). Following the collapse in crude prices, we saw a greater decline in gasoline prices in OECD countries versus non-OECD countries in 2015, as subsidies were removed in emerging markets and currencies depreciated against the dollar.