While inflation has impacted pretty much ever aspect of life in recent years, there's one place of quasi-relief for Americans: at the gas station. National gas prices are $3.449 per gallon for regular heading into the summer, according to AAA. That's down from $3.578 a year ago — and down from almost $3.70 earlier this year.
The Kiplinger Letter team predicts gas prices will stay on average well above $3 per gallon this summer. "Fuel demand has been a bit weaker than normal for this time of year, and crude oil prices have pulled back, leading to lower costs at the retail level. That’s good news for the summer travel season and for tamping down overall inflation," writes Kiplinger Letter managing editor Jim Patterson.
It's worth taking a look at gas prices around the world to see how our prices stack up on a global level. GlobalPetrolPrices.com, an energy data tracking company, puts U.S. gas prices in the bottom half of a global measure. And we pay the least for gasoline of any economically advanced country.
Have a look at how U.S. gas prices compare with other countries, and then we’ll discuss what factors contribute to differences between nations.
Gas taxes are a big factor
So, why? Chiefly, taxes. While in the U.S. these vary considerably by state (and we’ve tracked the 10 states with the highest gas taxes as well as the lowest gas taxes), on balance, gasoline taxes in the U.S. are low on a global scale. And again, among industrialized countries (the 38 members of the OECD) only Mexico has lower fuel taxes.
Nevin Valev, owner of GlobalPetrolPrices, has said the U.S.’s low rate reflects Americans' need — and desire — to drive long distances, and the political unpopularity of higher taxes. The summer price surge of 2022, for example, led to a variety of gas tax holidays or suspensions by a range of states.
On the other hand, smaller countries like Denmark and the Netherlands collect gas taxes so high that they are well in excess of what’s needed to maintain roads – they’re used for other government spending, or to discourage consumption.
The U.S. dollar's effect is significant
But taxes aren’t the only story. Currencies matter, too. Fuel is traded in U.S. dollars. So, if a country’s currency weakens against the dollar, oil — and hence gasoline — becomes more expensive in that country — even if there’s been no change in the basic price of oil.
Those are, of course, oil-producing countries that can more easily subsidize domestic gasoline prices when oil prices are high. While the U.S. is an oil producer — and exporter — as well, it does not engage in this sort of market fiddling, with the exception of releases from the Strategic Petroleum Reserve. And in European countries with oil such as the United Kingdom and Norway, fossil fuels used domestically are heavily taxed.
