So You Think Gas Is Expensive?

American motorists, who already pay less for gasoline than drivers in almost any other country, won’t benefit much from an election-year rollback in gas taxes, economists say.

That won’t stop Congress from voting this month to lower gas taxes by 4.3 cents a gallon, in response to widespread perceptions that U.S. gasoline prices have soared out of sight this year.

Margot Jamieson Witty, a New York-based freelance writer, said she was “shocked” by the $1.46 a gallon she paid to fill her tank last week. “I thought … that’s incredible.”

In most other countries, that price would be incredibly cheap.

In France, motorists were paying around $4.34 a gallon for unleaded gas last week; in the United Kingdom, between $2.84 and $3.41; in Japan, $4.00, and in Germany, $3.51. Even in Canada federal and provincial taxes push the per-gallon price to between $1.38 to $1.76.

As much as 80 percent of the price of gasoline in other countries represents taxes, levied to encourage conservation. In the U.S. though, where taxes account for just one-third of the cost of a gallon, prices averaging $1.31 have consumers angry.

“I don’t know what the psychological reason is for this,” said Charles DiBona, president of the American Petroleum Institute. “All you can say is here it is, the best bargain they get in any commodity.”

It’s true that gasoline prices have been on the rise since the first of the year. Prices now are 16 percent higher than the $1.12 a gallon they averaged back in January. Premium grades in some western states average as much as $1.62 a gallon, up 27 percent from $1.27 in January.

The recent run-up in gasoline prices is a function of market forces, not price gouging, oil industry analysts say. They cite the colder winter in many parts of the country that kept refineries producing heating oil rather than gasoline; unanticipated delays in crude oil deliveries; and companies holding stocks low in anticipation of a United Nations agreement to bring Iraqi oil back to world markets.

Those are temporary conditions that oil traders expect will be reversed in coming months. That’s why crude oil futures have come down from their recent peak of $25.34 a barrel, reached April 11. to $21.03 now.

Until the recent rise, prices adjusted for inflation were at their lowest point in the past 77 years - or the history of recorded pump prices. The API’s annual review shows the average cost of a gallon of gasoline last year was $1.20, or two-tenths of a cent a gallon lower than 1994’s average price.

In inflation-adjusted terms, prices reached an all-time high in 1981, when gasoline sold for $1.31 a gallon - $2.27 in today’s dollars.

By comparison, the savings from repealing the 4.3-cent-a-gallon tax increase of 1993 is insignificant, less than a dollar per fill-up.

And any money saved may just go right back in the gas tank. In recent years Americans have been driving more, farther, and with the recent repeal of the 55-mile per hour speed limit, faster. At the same time, they’re buying less fuel-efficient vehicles.

Cutting gas prices would probably raise consumption, and raise demand for gas-guzzling vehicles like trucks and sports-utility vehicles, according to Suzanne Rizzo, an economist with HSBC Securities in New York.

American drivers should realize “there’s a price to be paid” for driving bigger cars and more miles, and “if you’re not willing to pay, don’t encourage that type of behavior,” said Bill O’Grady, energy analyst at A.G. Edwards & Sons Inc. in St. Louis. “Europeans don’t.”

In Germany, for example, taxes make up about 80 percent of the pump price. They have risen steadily over the years to cover road costs on Germany’s toll-free highways and in a failed effort to reduce traffic and conserve fuel.