• 14 hours Oil Pares Gains After API Reports Surprise Crude Inventory Build
  • 15 hours Elon Musk Won’t Get Paid Unless Tesla Does “Extraordinarily Well”
  • 15 hours U.S. Regulators Keep Keystone Capacity Capped At 80 Percent
  • 16 hours Trump Signs Off On 30 Percent Tariff On Imported Solar Equipment
  • 18 hours Russian Funds May Invest In Aramco’s IPO To Boost Oil Ties
  • 19 hours IMF Raises Saudi Arabia Growth Outlook On Higher Oil Prices
  • 20 hours China Is World’s Number-2 In LNG Imports
  • 1 day EIA Weekly Inventory Data Due Wednesday, Despite Govt. Shutdown
  • 1 day Oklahoma Rig Explodes, Leaving Five Missing
  • 2 days Lloyd’s Sees No Room For Coal In New Investment Strategy
  • 2 days Gunmen Kidnap Nigerian Oil Workers In Oil-Rich Delta Area
  • 2 days Libya’s NOC Restarts Oil Fields
  • 2 days US Orion To Develop Gas Field In Iraq
  • 4 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 4 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 4 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 5 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 5 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 5 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 5 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 5 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 5 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 5 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 6 days Venezuelan Output Drops To 28-Year Low In 2017
  • 6 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 6 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 6 days Kinder Morgan Delays Trans Mountain Launch Again
  • 6 days Shell Inks Another Solar Deal
  • 7 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 7 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 7 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 7 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 7 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 7 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 7 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 7 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 7 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 7 days Norway Grants Record 75 New Offshore Exploration Leases
  • 7 days China’s Growing Appetite For Renewables
  • 8 days Chevron To Resume Drilling In Kurdistan
Alt Text

New Importers Keep LNG Markets Tight

While increased LNG demand from…

Alt Text

Gas Wars: The First Energy Conflict In 2018

Territorial disputes over newly discovered…

Alt Text

Will 1 Billion EVs Crash Gasoline Demand?

Electric vehicle sales are picking…

Is U.S. Gas Really Expensive, And Will It Get Cheaper?

Is U.S. Gas Really Expensive, And Will It Get Cheaper?

As an Englishman, when I moved to the U.S. more than 10 years ago, two things struck me almost immediately. I was stunned by just how cheap gas was and even more stunned by how many people complained about the price. Of course, the distance one needs to drive in everyday life here makes expensive gas that much more painful, but is gas in the $3.50 to $4 per gallon range really that expensive, and can we expect to see it any lower in the near future?

You can certainly point to examples that would suggest that it is expensive. In Saudi Arabia for example, the equivalent of one U.S. gallon of gas will run you about $0.60 and in Venezuela, only $0.05, but when compared to other industrialized western nations, gas in the U.S. is actually cheap. In the UK, that same gallon of gas will set you back $7.93, in France $7.23 and in Italy $8.25, according to the website globalpetrolprices.com. In fact, gas in the U.S. is cheaper than in any other similar country, with Australia second cheapest, at $4.93 per gallon.

Related: Dropping Prices and Supply Glut Sends Oil Into Floating Storage At Sea

Of course, most of that difference is down to differences in taxation. Once the gasoline taxes and VAT are accounted for, around $3.02 of the UK price goes in taxes, for example. Compare that to less than $0.50 in taxes per gallon on average in the U.S., according to the latest report from the American Petroleum Institute (API).

Relative pricing and taxation aside, though, it is the cost of oil that makes the biggest difference in the price that you pay at the pump (about 67 percent of the total, according to the EIA). That is determined by a global market that responds to simple supply and demand. As the oil from the shale boom in North America has come online and demand has dropped, WTI crude prices have fallen from around $104 per barrel to around $90 over the last six months.

Crude Oil WTI

That, in turn, has resulted in the average price of gas in America falling from over $4 per gallon at the end of spring to the current $3.63 level, but it is hard to see that fall continuing much further.

Shale oil may be plentiful, at least in the short term, but it isn’t cheap. The average cost to produce a barrel of oil from shale in the U.S. stood at $72 earlier this year.

Related: With LNG Export Battle Won, Are Oil Exports Next?

This means that if the price drops much further, many wells will become economically unfeasible and production would slow, once again putting upward pressure on prices. Given that, and the basic fact that oil is a finite resource for which demand is still growing, it is hard to envisage oil at a price that equates to gas under $3 anytime soon without a major economic collapse.

It looks, then, as if my American friends will just have to get used to paying well over $3 per gallon for gas, but just remember, things could be worse. You could be driving around Tuscany and paying $8.25 – although, on second thought, maybe there would be enough offsetting factors in that case to make the price of gas bearable. It is, you see, all relative.

By Martin Tillier of Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • Tim Bilsky on September 25 2014 said:
    I'll give you that gas prices here are much cheaper relative to other (primarily European) industrialized nations in the West, but should we settle for that? If we built a new refinery in this country in the last forty years, gas to the end user would be nearly unshakably affordable at all times. If the goal is for the citizen to have the most affordable resources possible, then the government needs to allow investment in raising refining capacity. Actually, the government should endorse that. The difference between the U.S. and Europe is that we've despised taxation from our inception. So, when we see commodities being taxed at a higher rate than most other products, we cringe and complain. It is justified, though. Governments of most nations take far more than they need to serve the primary function of protecting its citizenry. That's the problem. Government has its hands in too many issues and only serves to exacerbate those issues and raise the end prices (see Obamacare).
  • Harry Palmez on September 28 2014 said:
    Is gas expensive? Cheap?
    All I know is to see what gas went for in 1963.
    (full-serve, I know)
    Then look up what a 90% silver, 1963 quarter is worth now in metal value.

    You'll discover an amazing thing.

    And that is with silver in a currently supressed, beaten down 2 year low price.

    The cheapest gas was since it was invented was 1998-99, during the asian economic collapse period.
    .96 a gallon or 12 cents in 1963 dollars, using the above metric.
    I'd say it's neither cheap nor expensive right now. It's about at the historic mean price.
  • MJ on December 31 2014 said:
    Gas is under $2/gallon now and we have yet to see this major economic collapse. Do you predict football games too?

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News