Why are Americans so angry about petrol prices?

 
Petrol pump

Rising petrol prices in the US are expected to be one of the key issues in the 2012 presidential election. But Americans still pay half of what Europeans fork out on the forecourt. So why is it such a big deal?

Whatever bounce President Barack Obama has received from Osama Bin Laden's demise, there is a widespread belief that his fortunes at the ballot box in 18 months will be decided by two things.

Gas and jobs.

Bar chart showing petrol prices in US and six other countries

While the latest employment situation appears to be mixed - figures last week suggested both jobs and jobless rose in number - the president will be closely monitoring feelings on the forecourts of petrol stations across the US.

A survey published on Sunday by Lundberg said the price of a gallon of petrol (a US liquid gallon, not imperial), had hit a nationwide average of $4 (£2.40), just 11 cents short of the record high in 2008 at the height of the financial crisis.

There has been some respite since the weekend with prices of gas, as it is known in the US, reportedly falling by five cents in some places, but the anger felt by drivers shows no sign of abating.

At Tyson's Corner Center, a huge shopping mall in northern Virginia, motorist after motorist said it was hurting them in everything they did - the commute, the weekly shop or the school run.

And worryingly for the faltering economic recovery - and the president - they said they were being forced to cut back on other spending to pay for gas.

What US motorists say...

Orgil Ganbold

"I notice the gas prices increase a lot because I spend about $200 a month on it. I've been driving for 10 years and this is the worse I've known it," says Orgil Ganbold, 29, pictured in his Jaguar.

"I earn the minimum wage and half my pay cheque goes on gas," says Aimen Idris, 20, who works in a shopping mall. "So I'm not eating out and not going out as much."

"It doesn't affect me so much because I live near where I work. But my friends talk about it a lot and my daughter hasn't visited since spring break because she can't afford the gas," says Gloria Burtrago, 50.

"Of course it's hurting, it's $1.25 more than a year ago. I'm considering buying a bike and cycling the four miles to work," says software engineer Pedro Alvarado, 25.

Drivers speaking from Tyson's Corner, northern Virginia

The issue is so important that it is rarely out of the news, with TV bulletins continually monitoring the prices and analysts always on hand to discuss the consequences. Polling suggests it is one of the biggest concerns among the electorate.

In Europe, prices are roughly double the US due to the tax, but the anger is not so palpable, and almost certainly not about to influence elections. A protest planned in the UK at the weekend drew only a fraction the number expected.

So what is it about the American relationship with gas that makes it such an important issue?

Americans use their cars more, so the pain is greater. They have, on average, a longer daily commute than all Europeans, except Hungarians and Romanians. Public transport is generally poor so many Americans have no alternative but to drive.

But there is also a symbolic significance about gas that goes to the heart of what America is.

It signifies mobility, freedom and personal liberty, says Dan Neil, motoring correspondent on the Wall Street Journal.

"Anger is probably more tied up with a wider sense of decline and also a loss of privilege.

"Cheap gas has been one of the prerogatives of the American Empire so people have become accustomed to it in a way which is somehow associated with our ability to wield our will around the world.

Why are gas prices rising in US?

  • Crude oil more expensive due to global demand for cars
  • Ethanol price increasing for same reason, makes up 10% of gas
  • Unrest in the Middle East can affect supply
  • Sales tax and credit card fees are fixed percentages and so compound these increases
  • Speculation by investors has impact day to day but not much over long term

American Petroleum Institute

"We're mad because we've spent a lot of money in the Middle East and made a lot of enemies and defended a lot of tyrants and still gas prices go up."

And knowing that the British pay double won't make Americans feel any better, he adds.

"Americans are not aware of what the rest of the world pays for gas. We are a very big, inward-looking domestic market. We don't watch soccer, we don't watch French movies and we don't really care what the Europeans pay for their gas.

"It's a very big country and the entire infrastructure is predicated on scandalously cheap energy. Everything we do is big - business, agriculture, entertainment.

Start Quote

The reason why the British public are more sanguine [than Americans] is firstly because that's their nature”

End Quote Quentin Willson Motoring expert

"Where we live, where we play, all of that is predicated on cheap gas, so when the price of gas goes up, it really cuts to the heart of the American way of life."

The long-term solutions, he says, would involve a huge investment in rail, an overhaul of the infrastructure and a change in mindset - not events that happen overnight.

In the UK, there is no sign that the nationwide fuel protests by lorry drivers 11 years ago will be repeated soon, despite petrol now being double the price.

At the weekend, a protest at an oil refinery in Stanlow, near Cheshire, failed to draw the 1,000 vehicles expected. Instead there were little more than 100.

"The reason why the British public are more sanguine [than Americans] is firstly because that's their nature," says motoring expert and broadcaster Quentin Willson.

"And secondly, the fuel protests of 2000 will never happen again because the cops have got wise to it. Haulage companies have been told that if they start blocking refineries, they'll lose licences."

View from the Netherlands

  • Price rises are definitely reported - the oil industry puts out a consistent stream of press releases to keep the issue in the news - but there is no huge outcry
  • At current prices, Americans spend about $2,600 on transport fuel per head, almost twice the European average of $1,400
  • Petrol is relatively expensive and diesel relatively cheap in Netherlands, probably because we do not have a car industry, but do have a huge trucking industry

Mr Dings is the Dutch director of T&E which promotes sustainable transport across Europe

But the anger is there, says Mr Willson, who led a delegation to Downing Street to complain about fuel duty, and people are near breaking point.

They are stopping him in the street to complain, he says, and some are having to choose between food and fuel.

Petrol sales are down by a fifth in the last year and breakdowns due to tanks running empty are up by 17% in the same period.

"We're on the cusp of social unrest," he predicts.

But petrol is unlikely to define a UK election. In the US, gas prices are a bellwether of consumer confidence, says Mr Neil, and will be more influential in 2012 than Bin Laden.

Republicans blame Obama for gas prices, while Democrats blame oil companies, and they're both wrong, he says. It's more complex, to do with US oil refineries running at capacity and speculators driving up the price of crude oil.

Line graph showing price of petrol in the US and price of crude oil

The one key driver behind rising prices is the price of crude oil, says John Felmy, chief economist at the American Petroleum Institute.

It's increased in price by about $1.20 a gallon since August, he says, driven by increased global demand, especially in China and India, where more and more people are driving cars.

Zipcode lottery

  • Chicago, Illinois, $4.50
  • Los Angeles, California, $4.26
  • Seattle, Washington, $4.04
  • Boston, Massachusetts, $4.04
  • Newark, New Jersey, $3.87
  • Tucson, Arizona, $3.62

Source: Lundberg Survey

The portion of tax imposed by the federal government has not risen for several years, but there's a big variation between states, illustrated on the CNN website, which reflects the duties imposed by states.

Rising oil prices mean bigger profits. Last month, Texas-based oil company Exxon announced profits of $10.7bn (£6.4bn), up 69% on last year. There was an outcry, given the pain felt by motorists.

Mr Obama has said he wants Congress to end the $4bn in annual tax breaks for the oil and gas industry.

Although this won't affect prices at the pumps, he wants the money to be invested in clean energy sources.

But some of his critics say he should be doing more to liberate restrictions on American drilling.

Either way, as long as American drivers are feeling the pain at the pumps, the president will be wary of how that pain will play out at the polls.

 

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