The Memorial Day surge hasn’t even arrived and gasoline prices are nearing $4.00 a gallon with average weekly increases of about 7 cents a gallon.
Although many people say that America has lower costs for gasoline and diesel areas such as European countries specifically England where they are paying $8.20 a gallon have a 60% or higher fee on gasoline that is used for a variety of government programs. With a 60% tax England drivers are actually paying about 50 cents less a gallon or $3.28 for regular gasoline.
Basically Europe taxes Gasoline the same way America taxes Tobacco.. When you purchase a pack of cigarettes for $5 or more and the actual cost to produce is about a dollar maybe less the added costs on tobacco users are paying for school lunches for kids and just about any other program that they can think of…
In the United States taxes on gasoline vary from state to state but for the most part federal highway taxes and state taxes are less then 15% of the total cost. This is because unlike tobacco taxes US taxes on Gasoline are applied with relation to the products use.
An additional factor is the extended distances Americans commute to work and ship products. When you look at the population and layout of most European countries they do not compare to the distances Americans need to travel every day.
For the mid-atlantic and surrounding states Philadelphia acts as a main hub for imports of produce and other market staples. If you consider the costs of shipping produce from South America to Philadelphia and then to interior states such as Kentucky, Indiana and other locations the cost of trucking fresh food is far higher then supplying most of Western Europe. Unfortunately shipping by rail is just not an option when you consider fruits and vegetables that have been on a ship then processed for reshipping will require an added week or more by freight train. For some products this is possible but for many it is not.
So, what does all of this mean for us?
It means we are seeing added increases not only in our personal fuel costs but in any item that needs to be shipped over the road by truck.
In addition unlike many countries the costs are not taxes that add value to our lives. Sure if you buy gasoline that means you drive on streets so a fraction of your cost should be put to cover road projects. But unlike England, Europe and other countries Americans won’t stand for unrelated taxes being applied to their fuel costs. This is a more equatable way of taxation.
What does the Summer Hold?
Many economists are predicting $5 a gallon fuel costs by the end of Summer but before prices hit those all time highs there will most likely be investigations into why we are paying more at the pump.
Is it completely higher use from developing countries such as China pushing up prices or are there other factors?
If prices continue higher then $5 a gallon it is likely to cause an international crisis where inflation can no longer be held in check. However at what exact price would something like that happen? It is difficult to say because so many secondary and distant factors come into play.
If people cancel vacation plans or Christmas purchases or decide not to buy that car then that means people in those professions lose their jobs. They apply for Government Assistance which is a burden on every tax payer and they also can not purchase items or services.
It is like a modified domino effect but instead of having one fall after another in a snake shape they are all set up in a circle and when a few go down in one place one of the fallen pieces jumps up flies across the room and starts a cascade in an area that seemed unaffected until that point.