NEW MATH

Whenever gas prices spike (for reasons having more to do with speculation than "supply and demand", as we are so often and so condescendingly told) it is only a matter of time until someone points out that we shouldn't complain because gas is far more expensive in Europe. CNN helpfully offers an editorial entitled "America, quit whining about gas" to encourage you to be stoic about the impending $4.50/gal summer. The author points out that Norwegians currently pay a staggering $11.54/gal for petrol/gas. Wow! That sure is expensive.

Right?

Well, maybe. Indulge me in some napkin math. For the sake of argument, let's briefly overlook the fact that European cities actually have functional public transit systems (compared to, say, Miami, Atlanta, Los Angeles, Houston, Phoenix…) so driving is not quite as integral to daily life. And bear in mind that European gas is so much more expensive because it is taxed to hell and back.

I drive an elderly Nissan Sentra that gets approximately 30 mpg. I fill its 12-gallon tank twice monthly. Let's round up from the current prices and say gas is $4/gal, as it will be soon. It costs me (12 gal x $4 x 2 fill-ups) $96 per month to fuel my car.

Assume Sven drives the same car and fills up with the same frequency. He's paying (12 gal x $11.50 x 2 fill-ups) $276 per month. Jeez. If we had Norway Prices in the USA, I'd be out an additional $180 per month. Gas in Europe sure is expensive!

Except it isn't. With Norway's high tax burden comes a 36 hour work week (with a mandatory month of paid vacation), free health care, and a public pension system that is likely to actually exist when Sven gets older. Time for more math. According to my pay stub, I pay $140/month to Social Security and $200/month to a state-run pension system. Then I pay $130/month (single) for lousy HMO health insurance, $49/month for Medicare, and another $50 to a Health Savings Account that I use every month for prescription co-pays. That adds up to $569 every month to provide myself with health insurance and retirement benefits that Norwegians don't have to buy. I'm not so sure that Sven is jealous of the $180/month I save thanks to low American gas prices.

Yes, this comparison is off-the-cuff and imperfect. Sven's income taxes are also higher than mine, but the point is that the American system does a good job of creating the illusion of cheap commodities. We point and laugh at Europeans' large tax burden because it makes us feel better. However, when we consider the cost we pay out-of-pocket for things most Europeans have provided for them by their Oppressive Socialist governments, the question of who's getting the better deal becomes more complicated to answer.

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42 Responses to “NEW MATH”

  1. eau Says:

    Yes. Part of what I do for a living involves importing, and part of that involves importing from the US. It is very difficult to explain why, say, a book has US$7.99 printed on the back, but in Australia, you're paying double that (especially now our currencies are at parity).

    I usually go with a standard "We are on a rock in the middle of the ocean with a population smaller than New York State.", but recently I've been mixing it up with a bit of "One or both of us would need an economics degree to properly go through this, but you know how the US economy is tanking, and ours isn't? Yeah, that.".

    Or, if my Conserva-radar is pinging, I just say "Taxes" and put my fingers in my ears for the next five to ten minutes. They get to rant, I get a sale – win/win.

  2. Rosalux Says:

    Nice post – the key question here though is whether we think high gas prices are a GOOD thing. On the one hand they incentivize people to drive less and use public transportation more (thus incentivizing investment in public transportation), but then again in the short term higher gases are really a regressive tax on those who can afford to pay least. Ultimately, I think you've got to break some eggs to make an omelet so I hope gas prices continue to rise.

  3. Major Kong Says:

    Europeans also have nice diesel cars with manual transmissions that get 40+ mpg.

  4. Forgetful Man Says:

    Thank you. You are right. This is well written and spot-on. Cheers from the land of Timbits and Bacon.

  5. ladiesbane Says:

    Okay, I stayed quiet during the Vietnam post, but I have to pitch in now.

    In the podunk village where I grew up, the cost of gasoline has always been resented. It's a zillion miles between points A and B, and everyone drives ancient Mopar / muscle or modern Canyonero type vehicles that "smell like a steak and seat thirty-five," all of which are gas hogs. But the high gas prices are grudgingly accepted, even though we produce the stuff, and you'd think that would make it as cheap as wine in France. Here is how it works in their minds.

    My old state is home to a lot of cattle, and no one can find a decent steak, much less afford one. Why? We export as much as we can. We need cash more than we need ribeyes. Big butter-and-egg-men from the west can spend themselves silly on our good beef, and we can spend those earnings on mortgages and braces and Hamburger Helper…and gas.

    There is an old phrase that still gets play in my hometown, especially when stuff costs a lot: "at least it keeps the money in circulation." That was true before we had a few absurdly wealthy oilmen throttling the enormous serf class for a significant portion of every paycheck.

    Or was it true only after the Chartist Riots and eventual Reform? I forget.

  6. Middle Seaman Says:

    Public transportation in Yurp is governmental mostly. They don't need to "incentivizing investment in public transportation." They don't sing the moronic refrain we hear incessantly: less taxes will make the filthy rich invest.

    At the bottom line one finds that our quality of life is very low compared to many Yurpean countries. Health care, long vacations, 8 hour days,cheap prescription drugs, very few private universities with price tags that are unacceptable and more are much better than our faking being a modern country.

    We are a country with a social maturity of the middle of the 19th century. Our conservatives are radical reactionaries, our center is on the right and our left is a fake remnant of what used to be a liberal movement. Fire trUCK

  7. c u n d gulag Says:

    Yeah, Ed, all that may be true but we still lead the world in having the strongest middle class, the best education system, longest life expectancy, lowest infant morality rate, highest standard of living, and…

    What?
    What's that you say?
    Oh!
    Really?

    Never mind…

    Thank you, Conservatives!

  8. Jimcat Says:

    At heart my sentiments are liberal when it comes to the social safety net. But when I read articles like this, a part of me thinks: "You're taxed so little and have such cheap prices for the necessities of life. You've got no one to blame but yourself if you spend everything you make (and more) on fancy crap. Don't come whining to me if you wind up old, fat, sick, and broke."

  9. Elle Says:

    However, when we consider the cost we pay out-of-pocket for things most Europeans have provided for them by their Oppressive Socialist governments, the question of who's getting the better deal becomes more complicated to answer.

    Anecdata, but my husband works for a US-headquartered multinational. A number of his colleagues, from across Europe, have spent some time working in the US. A common theme of the expat discussions is how damn expensive it is to live in America, because of all of the supplementary costs. For example, they have been surprised at the fact that if your child goes to a public school, you have to pay innumerable extras, they report, for all kinds of art / music / science / PE supplies, textbooks, and paper to write on, because the school system is so underfunded. People expect to pay extravagantly for medical care, but the endless small things really add up.

    Public transportation in Yurp is governmental mostly.

    There's an increasing amount of privatisation, and public/private partnership, sadly. I love Europe's public transport, mostly, but anyone else who has ever spent any of their summer being sweltered in a suit on the Paris metro / London underground / Berlin U-bahn / Brussels metro will appreciate the air-conditioning on the New York subway. There's a lot to love about that city, but air-conditioned mass transit is the ne plus ultra of civilisation.

  10. comrade x Says:

    Yeah, Jimcat, all those dumbass poor people living in ghetto tenement apartments and Appalachain trailers are spending all their money on big screen TVs and BMWs. Guess someone was paying attantion to Bill O' Reilly today.
    Jesus, no wonder this country is so fucked up. " I got mine, so fuck you" is the attitude of someone with the moral development of a 3- year old.

  11. Coffeeman Says:

    I suspect that if you added in the cost of our military/CIA involvement in securing the US inalienable right to oil you would have an actual cost at something like $15/gallon.

    Last I checked, China, Russia and most European countries were doing fine without doing things like threatening Iran. Funny how countries with no oil reserves do not get our attention/$s.

  12. Arslan Says:

    It's also worth pointing out that in Europe many people drive compact cars which, even if they aren't diesel, get excellent MPG(litre, really). Many European cities are smaller as well. Phoenix, for example, is simply vast. You must have a car in a city like that. Moscow is one of the biggest cities in Europe yet it is incredibly accessible via one of the greatest metro systems in the world(it's the only thing that works in Russia, and works well).

  13. doug Says:

    Coffeeman nails it. Vast majority of US military spending should be paid by gas taxes, not general funds.

  14. Major Kong Says:

    US cities are "vast" because almost all of them were built around the automobile. Nobody really gave a thought to "hey, gas might be expensive someday".

  15. Kulkuri Says:

    Sven in Sweden is paying about $8 a gallon and getting the same bennies as Knut in Norway. Those bennies you mentioned are just the tip of the iceberg. Both Sven and Knut get paternal leave after fathering a kid. They get all kinds of subsidies that are unheard of here, like housing subsidy and a subsidy for that kid until it's 18 and free or very low cost higher education.

    Maybe that's why they can afford to vacation all over the world during their long vacations!!

  16. acer Says:

    It's goddamn expensive to be poor in America. That's the price of "economic liberty" for the super-reech.

  17. Mike Says:

    @Jimcat: The median U.S. household income is $50,000. If these people would just stop buying fancy crap, I'm sure they could afford health care, college tuition, and save for retirement. If they pooled their money together, they could even buy themselves a l ight rail system.

  18. Celynne Says:

    People expect to pay extravagantly for medical care

    Really? How?

    Although things are a long way from perfect here in the land of Timbits and Bacon, or in that there Yurp my folks came from, it's really the health care thing shocks us most 'bout U guys.

    My father first immigrated to the US, thought he'd gone to heaven when he discovered he could actually afford a Cadillac on a salary that would only buy a motorcycle in his home town. Wasn't so impressed when he had to sell said Caddie to pay for an industrial-related injury and headed to the land of socialised medicine to the north immediately afterward.

    Lucky thing he did, cuz one of his grandkids suffered a crisis that required a med-evac helicopter, 10 days in ICU, a month in a regular hospital bed and two years of therapies and other medical support at a conservatively estimated cost of around $1M, which using napkin math represents about 20 yrs of her parents taxes.

    Out of pocket expenses cost her parents about $10 000 for hotels, food, transportation, etc, but employment benefits covered lost wages and pharmacutical costs, they got to keep thier house, cars, savings, investments, kids' education funds and also got to continue using every tax funded service for those 20 yrs.

    And gas? The day my father died gas prices here still hadn't reached what he last paid in that Yurpeein' country he left 40 yrs earlier.

    Yup, my wages are lower and my taxes are higher and believe me there's incredible room for improvement here, but compared to the US, vive la difference!! Cuz that $1M bought a lot of higher priced SUV's, steaks, vacations to DisneyWorld and big screens, which I can use to watch the Con spin doctors using gas prices to negate any economic gains made by those ungodly, socialist Obama-ites.

  19. Elle Says:

    People expect to pay extravagantly for medical care

    Sorry, Celynne, but I think you've misunderstood. I meant that people here [in Europe] expect to pay extravagantly for medical care when they go and live in the US. The stickershock was at the incidental, cumulatively expensive extras that it hadn't even occured to them to budget for.

  20. HoosierPoli Says:

    Not to mention our infrastructure is a fucking mess because gas taxes can't cover the cost. For a country that puts all its eggs in the "drive everywhere" basket, German roadways put the Beltway to shame.

  21. Celynne Says:

    @ Elle

    Ahh, gotcha. And you make an excellent point.

  22. sluggo Says:

    Ed,

    You say that you $130/ month for Health Insurance? That's a little low. You forgot what your employer's portion which I would guess is about $250-$300. So your crappy health insurance is about $400 per month.

    For you overseas folks, dig this: I have decent health insurance thru work. It cost me about $130 out of pocket and my employer another $700 to cover me and my wife. That's $830 a month!!!! Add in some co-pays for doctor visits and prescriptions to the tune of $20 to $50 each and pretty soon my health care costs $1000 per month!

    My mortgage is only $970/month!

  23. bb in GA Says:

    @coffeeman

    I think the $15 per gallon ranks closer to propaganda than fact

    Consider that the US has spent about $1.4E12 on the wars in the 2001 – 2011 period.

    $1.4 Trillion (per http://www.nationalpriorities.org)

    How do we value the lives lost or destroyed? Intangible for sure. My family members are priceless. But, the usual way to guess at this is the economic value.

    Assign $5E05/ productive per person per lifetime ($500,000) destroyed in Iraq and Afghanistan

    Assume we have destroyed 1E06 economic lives.

    That extends to $5E11 or

    $500 Billion or $0.5 Trillion

    Assume $2E06/ productive per US personnel/ lifetime ($2 million)

    Assume we have destroyed 20,000 economic lives (dead and injured) of US service persons.

    That extends to $40 Billion

    $40 Billion or $0.04 Trillion

    Assume that the lifetime cost of caring for the injured equals 10X that same cost.

    $400 Billion or $0.4 Trillion

    Infrastructural damage in Afghanistan and Iraq – based on reconstruction estimates is less than $50 billion or $0.05 Trillion

    The total cost to this point:

    1.4 + 0.5 + 0.04 + 0.4 + 0.05 =~ $2.4 Trillion.

    Oil Consumption – about 18E06 barrels/ day

    10 years = 3650 days => 6.6E10 barrels total

    Barrel = 42 gallons with a gasoline yield of about 25% (conservatively low) => 10 gallons

    Total Gallons = 0.25 * 42 * 6.6E10 = 6.9E11 gallons

    Premium Per Gallon = $2.4E12/6.9E11 gallons = $3.48

    So, if we load these costs on the present price of gas, we in Georgia should be paying about $7.00 per gallon right now.

    //bb

  24. Major Kong Says:

    @bb

    Keep in mind that we've been paying for a military presence in the Middle East since the late 1970s.

    So add the cost of keeping the 7th Fleet in Bahrain, Desert Shield, Desert Storm, Northern Watch and Southern Watch to your tally.

  25. bb in GA Says:

    @major kong

    Yes sir. If I get time I will geek it out.

    Remember that the denominator will change too since we have been consuming gasoline (roughly at 25% of the bbl/year rate) for all those years as well. Of course, inflation adjustments get in there to jack the $.

    Unless we believe the numbers from the gov are sandbagged extremely low, I don't believe we are going to get to the $15 per gallon number that has been thrown into the discussion.

    I don't know why the Truth, (whatever it is in any case) isn't sufficient. As we say in Georgia "The Truth don't need no proppin' up."

    Right or Left seems like they just overblow it. (not @coffeeman, but his source…)

    //bb

  26. Rosalux Says:

    @elle

    Wait, are you really suggesting that the New York City subway is superior to the London or Berlin metros? Have you ever spent more than a day actually riding the New York subway? Yea, the cars are air-conditioned but the platforms aren't so you're a hot, sweaty mess by the time you get on the train anyway. And, in any case, air-conditioning is kind of a moot point because half the time your train won't come, or will come an hour after you expected it to, or will be jammed to the gills at rush-hour, or will reek like homeless person or human excrement, or oh man don't get me started…The Berlin U-bahn is like a 4-star hotel in comparison.

  27. Nate Says:

    We're selling the benefits of a social democracy the wrong way. Look at the parking lot outside Sam's Club and Costco on a weekend. Everyone loves those giant jugs of mayonnaise and 12 packs of tomato soup, we just need to convince people that the government is the means by which we can buy health care and high speed rail in bulk, too.

  28. cbb Says:

    Most economists and actuaries suggest that the value of a life in the US is closer to $5 million, not $0.5 million, as bb estimates. See Gary Becker's discussion of the Statistical Value of Life and/or the Congressional Budget Office for more information. A full accounting, therefore, may come closer to some of the higher estimates above.

  29. Elle Says:

    Wait, are you really suggesting that the New York City subway is superior to the London or Berlin metros? Have you ever spent more than a day actually riding the New York subway?

    Yes, I've used the subway to commute for random weeks at a time. I don't know about superior, because the NY subway has frustratingly limited coverage, whereas the tube in London will get you anywhere. (I can hear howls of protest coming from the one G+T reader who lives south of the river, but I'm choosing to ignore them.) The tube, the Paris metro (which is adding air-conditioned carriages), and the Brussels metro are all extremely convenient, but all of them are pretty steamy in the summer.

    The U-bahn loses points with me for steaminess, plus its terrible map, which doesn't make it clear when you have to go outside and walk to another structure that is allegedly the same station, and also included stations that hadn't yet been build last time I took it, to my chagrin.

    Yea, the cars are air-conditioned but the platforms aren't so you're a hot, sweaty mess by the time you get on the train anyway. And, in any case, air-conditioning is kind of a moot point because half the time your train won't come, or will come an hour after you expected it to, or will be jammed to the gills at rush-hour, or will reek like homeless person or human excrement, or oh man don't get me started…The Berlin U-bahn is like a 4-star hotel in comparison.

    I think that NY's subway is made much more palatable to me because I don't really know when the trains are supposed to come, so they don't seem late to me. Also, the conductors are really entertaining. London underground platforms are crowded, and unbelievably hot in summer, so NY doesn't really lose points by comparison.

  30. Elle Says:

    Sorry Rosalux, that last comparative review of underground railways was for you.

  31. bpasinko Says:

    @Rosalux

    I haven't used any other subway line to compare but I ride the NY Subway every day and while it can certainly be frustrating, I'm a big fan. I live in Brooklyn and in less than an hour I can be anywhere in the entire city.

    Yes, there is often construction and when it's over you hardly realize what they fixed, but overall I can't complain about its ability to move millions of people a day without any large hitches.

    Plus the benefits of AC can never be understated.

  32. Rosalux Says:

    @elle@bpaskino

    I didn't mean to overstate my case – I am fond of the NYC subway, having been a daily rider for about 5 years, and the conductors are mighty entertaining, aren't they? And I'm impress by Elle's comprehensive knowledged of Euro transit. I can only really speak for Berlin and London, and ultimately where I think Berlin wins out is that, if the U-bahn (which is sparkling clean, by the way), doesn't work, then you can always take the S-bahn, which goes virtually everywhere. Or you can use one of the city's fine bike lanes. Amazing that some cities were built to actually move people quickly and comfortably. Musta been summa dat gub'mint intahvention.

  33. bb in GA Says:

    @cbb

    Thanks for the info, but you misread.

    The Afghan/Iraqis were assigned $500K. The Americans were assigned $2 million.

    But if you look at the order of magnitude here even if you bump the American human values to the $5 million level you ain't gonna make $15 / gallon.

    //bb

  34. Elle Says:

    And I'm impress by Elle's comprehensive knowledged of Euro transit.

    Yes, I'm a wow at dinner parties.

  35. Xynzee Says:

    @eau: it's not just taxes its also wages. One can work in a bar and still live close to the Sydney CBD, or even at the beach. Though if you want to save there's always Rooty Hill, but out there you start coming to need a car as PT is abysmal out there. Which is ironic really. The heavily serviced areas low income earners can't afford, but then need a huge expense of a car to live where they could easily live within their means.

    Most Australians from my experience really have no idea how good they've got it the way they whinge. Particularly those who shelter in the shadow of Dumbo's ears. Perhaps whitewhine.com should consider changing the name to youmustbeanaussie.com

    Nothing's perfect, but it beats what's happening in the States. I just hope that the GOP craters, and craters so fantastically that any yahoo who quotes Norquist or Rand will be burnt at a stake.

  36. Bernard Says:

    here in New Orleans they tore up the huge street car system for the cars when cars took over the streets. now they are re building them is spots. also they cut down the huge old oak tree to put concrete overpasses so all the white folks could avoid the "others" living in the urban old part of town.

    the automotive system has been quietly subsidized for years by the powers that be. Quality of life is not valued as much as ease of access by cars.

    there is so much unacknowledge use of taxes to support the roads and highways that is never ever spoken of. Oil has captured our country years ago and it is not likely to let go without a fight. or maybe when Israel attacks Iran and the price of gasoline get to where it should be without all the subterfuge of subsidies we are not told about unless we ask or search for why is it America won't go to public transit.

    the whole anti Government/anti Society bent of the American, primarily Republican mindset is so strong and pervasive after 40 odd years of Propaganda, it is amazing to think how well most Americans are so easily led.

    my own father was in the hospital for a month til he died and it cost minimun of 250,000, and this was 20 years ago. the poor go to ERs for everything from toothaches to heart attacks.

    we, the working American pay so much for the lack of universal Health care. but dare say the truth and you are labeled a Commie surrender Monkey.

    those that know how to use the system do and the working taxpaying Americans pay for the Rich and the Poor. that's socialism, but not for the workers.

    the willingness to buy the lies of the Conservative, and their God St. Ronnie, has led us down a path to infinite endless wars and terminal class wars.

    but the scamming works and that's all that matters. Commies,i.e., caring for the other, real Christian values are not welcome here in America. Waiting for the crash, us working people have to do what we can to survive. i just hope, but doubt, the rest of the zombies would wake up soon. the safety net is crashing and yet there is nothing for the working class.

    so i don't expect the price of gas to go up without a fight from the Elites. this system works for them and has done very well for them for the last 40 years.

    thanks be to St. Ronnie, and his obedient followers.

  37. Arslan Says:

    "that's socialism, but not for the workers." There's no such thing as "socialism" that isn't for the workers. Government giveaways to corporations and private business are part-in-parcel of capitalism.

  38. Coffeeman Says:

    bbinGA,

    I pulled the $15 out of the air. What is implied in your response is that the US is more secure due to projecting power throughout the Middle East, not to mention the oceans of the world and some 180 countries where we have a military presence.

    I much prefer China's approach which is to use a State backed outreach to develop business and contract for oil. I suspect that in the long run, that approach will prevail. Empires cost money, lots of money. And there is a connection to how the US spends its money and the crumbling conditions in our country, be it public schools, roads and infrastructure, or healthcare.

    Oh, and did you factor in falling wages and falling standard of living in your equations?

  39. Southern Beale Says:

    Back when I lived in Denmark I was so surprised that no one used their cars. They had cars but basically just used them to drive to the summer vacation. The car was rarely used. Maybe to pick someone up at the airport because of luggage, etc. Also, no one used their telephone. Not like in the States where you pick up a phone and call for whatever. "Pick up a loaf of bread on your way home" phone calls just did NOT happen.

    That said, let me say: I have an electric car and I paid $8 for my "gas" last month. So, there is hope.

  40. Bears Fan Says:

    The thing that truly kills me is how destructive artificially inflated gas prices are to our economy. While what it adds to the GDP numbers may not show the shortfall, the truth is that the lion's share of the cash spent on gas goes to a tiny percentage of people at huge oil conglomerates and their shareholders, along with Wall Street speculators. All that disposable income that could be circulating around in local economies via consumer spending on things like eating out or going to the movies or buying your kid an extra toy, is instead going to hedge fund managers and other uber-rich folks that are manipulating the market through speculation. They then either stash it away, which helps nobody, or use their ill-gotten gains to increase speculation and continue to feed the beast and increase income disparity.
    Next to giving huge capital gains tax cuts to the rich so they can have boat loads of extra cash now, and screwing everyone else and taking cash out o their pockets on the back end by cutting social security or raising the retirement age, I can't think of any larger direct transfer of wealth from everyone to the top 1% than unjustified increases in gasoline prices.
    You would think that with supplies at historically high levels, domestic production so high, and demand fairly low, the Dems could easily make hay using gas prices as an example of free markets not working, and the need for, at the very least, investigations on Wall Street speculators.

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