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News and views from the German-language region of Europe

January 9, 2008

You think you pay a lot for gas? (2)

Filed under Life in Europe

With the price of oil on the world market recently having topped $100 a barrel, it is time to revisit this subject.

My last post on this subject was on May 3, 2006 gas station in Germany when the price of gas at the local station near my apartment was 1.35 € per liter. In early May 2006 a barrel of oil on the world market cost about $70 a barrel. In the meantime my local gas station has updated its price display to an electronic appearance, and the price of oil was recently just over $100 before settling into a price range in the mid 90s. That’s a 35 to 40 percent increase in the price of oil on world markets! So how has that affected the price of gas where I fill up? Today the price of gas at "my" gas station was 1.39 € per liter. That’s a 2.9 percent increase compared to the price on May 3, 2006. If I had taken the photo right after Christmas, the price would have been only 1.34 € per liter (but I was too busy with my move).

So why hasn’t the price of gas increased that much over here? It is because of the strong euro, which is now worth about $1.47. In May 2006 the euro was worth $1.25. That’s a 17.6 percent appreciation in the value of the euro to the dollar, which still doesn’t explain fully why the price of gas here hasn’t not increased that much. At 3.8 liters per gallon, I am now paying 5.32 € per gallon for regular gasoline. With the euro-dollar exchange rate today at $1.47 per 1.00 €, I am now paying $7.81 per gallon. (Of course, a big chunk of that price is the result of government taxation.) So over in the USA, you aren’t paying that much for gas after all, relatively speaking. :-)

The decline in the value of the dollar becomes apparent via this comparison. That is one reason why some OPEC members want to discuss pegging the price of their oil to the euro rather than the dollar. You can read my comments here on the decline in the value of the dollar.

Paul Kieffer's blog with personal insights and news from the German-language region in Europe.

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