The value of isolating your home, oil consumption, the Dollar and the Euro ...

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Today's Tagesschau reported an interesting bit in the economy part: In the last years the Dollar has lost consistently towards the Euro. Oil is traded in Dollars. Oil prices have risen dramatically as a result of the Iraq war. The value loss of the Dollar to the Euro, they reported, led to Americans today paying 250% more for oil than before the war, whereas Europeans pay 150% more for oil today than before the Iraq war.

Add to that that American energy consumption per capita is higher than in Europe, and you can conclude that Americans today pay much more for more oil than Europeans do. Interesting.

 

yeah its about $2.60 / gallon where i live right now

 

It's not so much that crude oil is cheaper in the US - it's that gasoline is less expensive. The price of oil is an international price set in US dollars. And while I haven't read anything suggesting such, I can't help but think that the recent rise in the price per barrel of oil (again, in US dollars) is at least partially a result of the declining value of the US dollar on international markets due to the fact that the US economy is in trouble.

 

Also, much of the price of gas in most European countries is due to taxes to pay for public transport (as I understand it). As public transport has never really taken off in the US, and woudn't be terribly effective for the vast majority of us, it isn't an issue here, so gas is cheaper because fewer taxes are added on.

 

They have been talking crude prices.

 

So basically in the EU it's the state takes the extra money, in the US it's the oil business. A lesson in comparative political economy - with a similar end result

 

I actually agree with NOG! The cost of gas in the U.S. has risen more sharply in the last few years than the cost of gas in Europe. Over the last several months, prices in the U.S. have stabilized at approximately $2.75 per gallon.

To convert that into Euro per liter:

1 gallon = 3.785 liters
1 dollar = 0.6939 Euros (based on the current exchange rate)

So the out-of-pocket price Americans are paying is the equivalent of a hair over half a Euro per liter (the calculations works out to 0.504 Euro per liter). That figure sounds a heck of a lot less than the European cost - and that's because of taxes.

 

and that is still with the oil companies reporting 8 & 9 HUNDRED percent profits at year end!

 

It is about the crude price at the bourse, not consumer prices. It is in my view misleading to look at consumer prices only. In my view the low taxation glosses over a few significant things. So I wiki-ed a little.

Crude oil in September 2000 costed 35 $/ barrel.
In September 2000 the $ vs € exchange rate was 0,85 $ = 1 €.

Crude oil today costs 95,93 $/ barrel.
Today the $ vs € exchange rate is about 1,45 $ = 1 €.

As a sidenote please don't start to discuss numbers here, what is important is the general trend, and if in fact the price in 2000 was really 34,6 or 38,51 instead of 35, I don't care in the slightest I want to look at the general trend and for that the numbers above are totally sufficient.

I see two things. One is a loss of value in the Us dollar against the Euro. How much of that is speculation I can't tell, but it suggests the possibility of something evil under way, and that is inflation in the US. The other thing is the fact that oil have increased prices and it might well exacerbate existing problems.

It doesn't require a great leap to conclude from that that for the US economy as a whole (as opposed to the individual buyer at the gas station) oil got more expensive, and that the US had to buy oil for a higher price. An added fact is that US per capita consumption of oil is roughly twice the European average. If the US at the moment really encounters inflation and also does consume at a much higher rate that suggests the question about sustainability.

Yes, US oil companies reaped substantial profits. So did the European oil companies. But how on top of these corporate profits the consumer's wealth is distributed is another matter altogether. That's why relying on the lower price at the gas station as an indicator is deceptive.

As for the high taxes here: In Germany for instance the high taxation creates a strong incentive to reduce consumption. Thanks to the low prices this incentive is not nearly as strong in the US. Thus there is consumer demand in modernisation and increased efficiency. So, the taxation pushes the market in a desired direction. It pushes forward innovation and increased efficiency, and that makes as much sense ecological as economical. It's an investment into the future.

 

why would it be misleading as the price AT THE PUMP is where the consumer is directly effected not the other way around

 

Because it does give little information about the effect on the economy as a whole? Consumer prices can be distorted by many things. The look at the oil market prices blends out US domestic market mechanisms that influence the process that leads to the price at the pump.

The look at the gas station only offers a view on one facet of a much larger crystal. Or analyses one pebble of an entire beach. Or one cow in the herd. One star in the universe. One plane in the multiverse. Or one drop in a sea of oil (which is a silly metaphor, because said oil as a drop it is not (yet) a part of that named ocean).

 

umm, no. its like looking at the little pebble that starts the avalanche. it shows the effects as it heads downhill

 

You're basically telling me: What famine? I'm not hungry. Have you ever considered that the oil price in the US, at the pump, might be actually higher despite all your perception to the contrary?

Take into account all the little things that are covered by the taxes Europeans have to pay that the US fuel buyer has to pay for some other way. That will be inevitable when you want to make a proper comparison. We can cut that short and spare us the fruitless detour of discussing the benefits or faults of US or European taxation and economy models when we just concentrate on the crude prices. And there I see something peculiar:

The US economy has a relatively weaker currency when compared to the Euro. Oil is traded in dollars. That means that Europeans get more crude oil for the same amount of money than Americans do. Americans also consume about twice as much which ought to exacerbate that.
But through sheer miracle the US car driver pays less for oil, even though oil costs the companies more, but they do make record profits, and everything is swell and great, and it's only because of Europe's weird taxation that it looks so odd. I don't buy that.

Dog turds don't turn into gold over night and you don't ever get something for free, much less in the US, so what's going on?

 

that is circular reasoning. i snort coke-so i can work more hours-so i can make more money-so i can snort more coke- and around and around.

so when YOUR boss tells you that you dont need a raise as your money goes farther as it is stronger vs foriegn currency that helps you how?

 

A serious answer anyone?

What ... do you try to say? I have read those two lines a few times and they remain a garble to me. Maybe it helps if we leave the green meadows of metaphoring and venture forth to the barren fields of concrete arguments, original thinking even?

The US dollar is losing toward other currencies, putting the US economy at a comparative disadvantage as far as buying energy is concerned. Also, non-US demand for oil is rising, and rising foreign demand will inevitably drive up oil prices even further. So whatever is at work there, oil is not going to get cheaper in the long run.

So why is it no problem that the US economy pays more for oil, and also consumes more. I don't get why.

And that's not just a question for Marty. My interest in this issue far exceeds the gleeful delight I feel seeing him squirm, unable to copy-paste an instant post in response. I'm genuinely curious. Anyone here who has knowledge of economy?

 

why is it the only time you have problems understanding english is when it is disagreement with you?
oh, and i cant shorten your name without making you sound like a can spaghetti sauce! ragu, anybody?

 

Marty,
you're lazy, and you start to get boring. Is there a way for you to make a coherent argument, along the line: No, Rags, you're wrong, it is no problem that the US economy pays more for oil, and also consumes more, despite the devaluation of dollar, because of A, B and C. If so, absolutely go ahead. We can then try to determine if our views differ, or where. If not, well, just be yourself.

 

wow, someone who can't even be bothered to write the full name of the person they are talking to accuses others of being lazy.we need to change your name to ron, first name mo. sorry if i didnt fall into your circular argument as you wished, get over it.

one of the reasons that it costs u.s. consumers less for fuel(OTHER than the huge tax difference) is sheer volume. simple economics(i'll keep it real simple for you) if you only sell z # of items/day you have to charge x amount over cost, if however you are selling (50times z) # of items/day you can sell them for 1/20x & still make a large profit

quantity, its really quite simple, however as you didnt come up with the idea it can't possible be right!