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I think the one piece of information missing is miles/GDP in other words how many miles are driven to generate the GDP of the various countries. This would include moving goods and personal transport.
If you added in miles driven then I suspect the Achilles heel of the US will show up. So although the cost is a much lower percentage of our GDP we drive probably 2-3 times the number of miles that the other nations do to generate our GDP. So rising gasoline prices rapidly drop the US GDP.
The US can certainly afford to pay more for Gas as can be seen with these simple calculations but it will be and is in a economy that is experiencing stagflation and asset deprecation. Since each penny increase has a 2 too even 5 fold effect on the GDP of the US and since its barely growing we almost immediately go into recession.
If you can get a miles/GDP then it will I think put this data in better perspective since I think your missing the big issue.
Here is Stuarts post on the subject.
http://www.theoildrum.com/story/2005/10/22/235239/89
I've got no idea how to find this for the various countries.
The simple calculation is the US is 5% of the population and uses 25% of the worlds oil so we use 5 times the worlds average usage to generate our GDP this is why I said higher energy prices have a 5 fold effect on the US GDP.
Stuart would have to do a better analysis but the magic number is per capita GDP/per capita miles driven. This tells you how the economy can handle higher prices. I contend the US is uniquely venerable since its high per capita GDP is effectively directly equal to the price difference in gasoline vs other western nations.
I think you are saying that it is the US’s tax policy on gasoline that has resulted in a higher GDP for them. Besides that going against basic Economics, you may want to recheck the numbers for Norway, Switzerland or Denmark.
I think he's saying that historically US per capita income (there's no such thing as per capita GDP) is/was higher than in other countries because more gasoline per capita is/was used to obtain it.. And I think he's right.
There is no necessary link to taxation, even though it can be implied.
I don't quite understand what your saying. Cheap gasoline is a major economic stimulant or better intoxicant. Subsidized gasoline combined with higher worldwide prices is one of the major factors in WestTexas export land model. The US is something of a hybrid since it is both a large producer and importer so it or at least parts of the US benefit from high prices. In some ways its better to think of Texas and Louisiana and Alaska as an exporter country to the rest of the US. But since "exporter" wealth tends to simply concentrate its not a strong driver of overall GDP in the US unlike a true exporting country with a National Oil company.
So either I don't agree with your statement or better don't understand it. Cheaper gasoline esp imports tends to increase GDP IMHO. In general the cheaper commodities are the higher the GDP since most of the GDP is in value add not bringing commodities to market.
Norway is unique since its a net exporter with high gasoline taxes. In effect the taxes vs income from exports probably leads to a low effective cost for Norway I don't think you have treated Norway correctly since they make quite a bit off their oil exports.
Denmark I simply don't know.
And the Swiss are well ... Swiss :)
True.
Not quite. Isn't the real comparison the US's consumption versus the average for the rest of the world? (Not "world including the US".)
Let's use the corresponding real numbers:
US: 20.8 million barrels/day divided by 300 million people -> 0.06933 barrels per person per day
Rest of world: 62.4 million barrels/day divided by 5700 million people -> 0.01095 barrels per person per day
(assumed total to make US 5%,25% figures: 83.2 million barrels/day, 6000 million people)
Ratio of US to rest of world: 6.33
The United states uses 6 1/3 times the rest-of-the-world average. So higher energy prices have a "6 1/3-fold" effect, given the 5% and 25% figures.
Okay :)
The point is the US economy is far more sensitive to oil prices then most of the rest of the world. And alternative transportation is a black/white or yes/no type of solution either you have it and can mitigate higher gasoline costs or you do not. The EU and many places in the world do have reasonable alternatives to driving so they can preserve their disposable income at effectively a fixed cost i.e. extra time taken to reach work. Although calling this a cost can be debated you can work on the train etc.
The US cannot. So the twin effects of a 6.33 multiplier and lack of alternatives makes the US uniquely venerable to higher gasoline prices even though the relative price per gallon between the US and the EU is about half. The economic impact as you can see is well over half as oil prices increase. This multiplier effect coupled with lack of mitigation strategies is the problem.
I agree entirely with your main points, I just wanted to point out that it's even worse than 5x!
Fear not, I’m not missing anything. It is the US (and Luxemburg) that is missing a proper tax policy.
With the right tax policy the US’ millage/GDP would never have gotten to were it is today.
I'm just saying that the US and I guess Luxemburg are uniquely venerable to high gasoline prices your paper is leading to this but the coffin nails are my opinion is the millage/GDP part of the equation.
For a good laugh here is the American viewpoint.
http://www.ti.org/vaupdate41.html
Under the covers of course is the suburbia driven economy.
Another Stuart post on the subject.
http://www.theoildrum.com/node/949/0
Finally found some numbers
http://www.narprail.org/cms/index.php/narpblog/europe_vs_usa_vmt_vs_gdp_...
They claim the US is consuming over 100% more gasoline than Germany a comparable economy. So my 2 times multiplier for the lower bounds on the price effect of gasoline for the US seems justified. I happen to think its higher.
If you just use this 2x multiplier you will see that the current prices put the US in effect equal to Europe without the tax benefit Europeans receive if thats included and you consider I think 2x is too low the US economy is already quite a bit weaker than the European economy on a gasoline cost basis. 4+ dollars a gallon would I feel put the US in the position of paying 12 dollars or so a gallon on a EU weighted economic scale since I feel 3x is a better metric.
This include the positive tax effect for the EU.
Its all a matter of how you do the numbers and how you discount the positive effects the EU gets from taxes.
But I think you would agree that 12 a gallon gasoline would have a negative effect on Europe and this is effectively what the US feels in my opinion at 4 dollars a gallon on a weighted scale. The US economy is already effectively negative at 3 dollars a gallon and .... we are in a recession or close to zero GDP even with number fudging.
I see your point, but I don’t exactly agree with it. The thing is: can the wealth output be the same driving less? Probably yes, in both places. Although as everyone knows the options for driving less are wider in Europe, just because of that tax policy. I don’t have numbers to say if 4 $/gal in US the equals 12 $/gal in Europe.
There’s also another point to be made about the tax policy. During 2005 gas prices rose 100% in the US, in the same period in Portugal (where the tax is considerably heavy) they rose merely 30%. A higher tax has this effect of shielding gas prices from rising crude prices. With a light tax policy, consumers in the US feel much more sharply the increase in crude prices, without that being affecting exactly more than in Europe their monthly budgets.
This is the whole point. As Europeans, we have already done are demand destruction. The tax policy was introduced in the 70s to deliberately reduce dependence on oil, especially after the UK horrors of the 3 day week - where our economy was literally reduced to 3 days a week working through lack of oil.
Petrol is expensive in the UK, so we have small cars, shorter commutes, more use of public transport, etc.
Petrol is already a large part of our budget. If it goes up from $7/gallon to $12/ gallon, it will be annoying, but will have relatively minor effects on my wallet, and on the economy as a whole.
So far the US has been in a demand destruction competition with the third world, and you have won that round.
Your next demand destruction competition is with Europe, and the odds are heavily stacked in our favour.
It was raining today, so I took the car to work. If the weather picks up, on Monday I will probably cycle. Because I can.
some sane people at the republican white house ? would you care to name names ?
Kagiso: Yes, the odds are heavily stacked in your favour in the next round vs the USA, but you are dreaming if you think Europe is outbidding China for crude oil on the world market.
There's another economic issue I haven't seen in this thread. The higher prices paid in most importing countries is not leaving the country. It is being cycled into government expenditures and I assume into the general fund, therefore paying for health care, defense, etc. The money thus used in Europe is available in the US for both other expenses and for investment. The investment part alone may be a part of the reason for greater GDP in the US. ...and for more pocket money to buy gas to drive around more in the Hummer.
There are various hints of the like in the comments. This goes against basic Economics. Google Trygve Haavelmo.
I think thats a bit garbled. The taxes part of the higher priced paid in the EU is recycled US gasoline taxes are so low they don't even cover road building expenses so they are effectively irrelevant since we use a lot of other tax sources just to subsidize oil based transport forget about using gasoline taxes for other uses.
I think thats what your saying. Its important and I was concerned that this would dwindle in the EU as gasoline got more expensive then decided that no the EU will keep the tax no matter what the cost. Finally technically the EU should have taxes high enough that gasoline is 2 -2.5 euros per liter if you wish to be impervious to peak oil. This does give a hedge that can be used short term to beef up public transport and longer term the tax can be slowly decreased as oil increases keeping the overall price constant.
So technically gasoline is still too cheap in the EU :)
That´s right i personally would have no problems with a gasoline price doubled from now. The price of food is more important.
Double post