Thursday, September 20, 2007

$3 a Gallon for Gasoline? How About $8?

Everyone has heard or experienced the fact that filling your car’s gas tank is much more expensive in Europe than in the U.S. We just returned from running our tours in France, and the sticker shock at the pump there is very real.

The price of the highest grade of gasoline at the autoroute (equivalent of an American interstate or freeway, or a British motorway) gas stations varied a bit, but it was on the order of 1.45 euros per liter. Let’s convert that into dollars per U.S. gallon for comparison. (Note- one can find cheaper gas at the stations run by the large supermarket chains in town- perhaps 15 or 20 euro cents per liter less. These stations are not available on autoroutes, however).

Since there are 3.8 liters in a U.S. gallon, the price for the gas is 1.45 X 3.8 = 5.51 euros per gallon. A quick glance at CNBC tells me that the dollar has dropped to a record low again today, $1.407 per euro just a few minutes ago (and that’s the official rate- if you are an American or Brit you need to pay 3 or 4 percent more for currency conversion and other bank charges). So the price of a gallon turns out to be 5.51 X 1.407 = $7.75 per gallon!

OK, that’s not $8, but it’s pretty close. And add to that the cost of tolls on French autoroutes, which I’ll estimate at about $10 for every 100 km (62.5 miles), and you can see that driving in Europe, and especially in France, is hugely expensive.

If you think this dissuades people from driving cars and trucks, guess again. It’s not the least bit unusual to wait 10-30 minutes or even longer on some heavy traffic summer days to pay a toll at a toll booth. The bottom line is that people simply have to drive cars in our society to get to work or go on vacation, and it appears they will continue to do so regardless of the price of gas.

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