Why U.S. Gasoline Prices Are Lower

Descending gasoline prices could make a difference in the U.S. election:

While they continue to sink in the U.S., global gas prices vary considerably.

Let’s take a look.

Gasoline Prices

The World

With Iran the cheapest and Hong Kong the most expensive, globally, the price of gasoline ranges from $0.108 cents a gallon to $12.535:

Meanwhile, Global Petrol Prices illustrated the price picture for 169 countries. The darker shading shows where to find higher gas prices:

Gasoline Taxes

Further nudging the price of gasoline skyward, European gasoline taxes are relatively high. At $1.47 a gallon (€0.359 per liter), the EU minimum tax is more than the U.S. high (combined federal and state taxes) in California. As you can see on the map, the Netherlands has the highest tax rate €0.789 per liter ($3.23 per gallon), with a gallon winding up at a whopping $7.83:

The US

Far from the world’s priciest gas, the U.S. average per gallon (Gas Buddy) was $3.07 on October 28, 2024. Reflecting lower crude prices, Gas Buddy predicts the price will continue to sink.

Mostly crude, the price of gasoline also is composed of three other variables:

State Prices

The difference between a gallon of regular gasoline in California and in Texas can be more than $2.00. You can see that there is a vast split between the high and low gas states in the U.S.:

State Taxes

These are the highs:

The lows are the lightest blue/green shades:

Our Bottom Line: Elasticity

When an economist looks at gasoline prices, she will probably ask about our elasticity. She will wonder how much the quantity we are willing and able to buy “stretches” or “shrinks” when price changes. If price changes a lot and the quantity we buy remains almost the same, as with medication, then our demand is inelastic. By contrast, if price swings have a big impact on buying, then our response is elastic.

With gasoline, knowing our elasticity is crucial for predicting the impact of taxes, of mass transit, of fuel efficiencies. Returning to where we began, because elasticities vary with incomes, employment, and urban populations, like the price of gasoline, they depend on where you live.

My sources and more: For the best barometer of gasoline prices,  Global Petrol Prices had the world’s facts while Gas Buddy has it for the U.S. Meanwhile, for the elasticity debate, this paper had some insight.

Please note that some of today’s sentences were in a past econlife post.