What’s the price of gasoline? Pain is felt at pumps around the world.
Bernd Mueller stands at a petrol station near the Cologne airport, watching the figures on the pump quickly rise: 22 euros ($23), 23 euros, 24 euros. The figures for how much gasoline he gets are also increasing. But at a much slower pace. Slowly, painfully slowly.
Mueller, 80, said, “I’m getting rid of my car this October, November.” “I’m retired, and there’s also gas and other expenses. You have to cut back at some time.”
Drivers all around the world, including Mueller, are reconsidering their habits and personal finances in the face of soaring gasoline and diesel prices, fueled by Russia’s war in Ukraine and the global recovery from the COVID-19 pandemic. Energy prices are a major source of inflation, which is rising over the world and raising the cost of living.
During rush-hour congestion in Vietnam, a motorbike taxi driver turns off his ride-hailing app rather than waste valuable fuel. For an August vacation, a French family sets back their ambitions. The cost of gas is factored into the bill for a night out by a graphic designer in California. When calculating the cost of driving her son to camp, a mother in Rome mentally ticks off pizza night.
Decisions in the global economy are as diverse as the people who make them and the nations they come from: Increase your walking time. Bring that bicycle back to life. Take the subway, rail, or bus to your destination. To save gas, use a softer touch on the gas pedal. Is that road trip really worth it? Alternatively, you could go car-free.
Millions of people who don’t have access to adequate public transportation or can’t live without their car must grit their teeth and pay while cutting costs elsewhere.
The cost of crude oil, taxes, the purchasing power and affluence of individual countries, government subsidies where they exist, and the cut taken by middlemen such as refineries all play into determining gasoline and diesel costs. Because oil is priced in dollars, the exchange rate plays a factor if a country is an energy importer – the lately weaker euro has aided in pushing up fuel prices in Europe.
And there’s often geopolitical factors, such as the war in Ukraine. Buyers shunning Russian barrels and Western plans to ban the country’s oil have jolted energy markets already facing tight supplies from the rapid pandemic rebound.
There is a global oil price – roughly $110 per barrel – but due to taxes and other variables, there is no global pump price. You might pay more than $10 per gallon in Hong Kong and Norway. It can cost around $7.50 per gallon in Germany, and around $8 in France. While decreasing gasoline taxes have reduced the average price of a gallon of gas in the United States to $5, it is still the highest price ever.
Higher energy prices put a strain on people in poorer countries, but Europeans and Americans are also feeling the pinch. Americans have less access to public transportation than Europeans, and even Europe’s transit networks do not cover everyone, particularly in rural areas.
Several countries have fuel price caps, including Hungary, where the discount doesn’t apply to foreign license plates. In Germany, the government cut taxes by 35 euro cents a liter on gasoline and 17 cents on diesel, but prices soon began to rise again.
On a recent holiday weekend, Germany also introduced a cheap 9-euro monthly public transit pass, which resulted in crowded stations and trains. However, the program only lasts three months and is of limited help to persons living in rural areas without access to a train station.
Is there any relief in sight? A lot depends on how the war in Ukraine affects global oil markets. Analysts say some Russian oil is almost certain to be lost to markets because the European Union, Russia’s biggest and closest customer, has vowed to end most purchases from Moscow within six months.
Meanwhile, India and China are increasing their purchases of Russian oil. Europe will have to rely on alternative sources of supply, such as Middle Eastern exporters. OPEC+, which includes Russia, has, on the other hand, been falling short of its output targets.
Many people are cutting back on their expenditure on things like nights out and, in Europe, the near-religious dedication to extended late summer holidays.