You Think Gas Is Too Expensive? Visit Europe

WARSAW, Poland. Americans should not complain about gas prices, say Europeans when they fuel up their ecological sedans. Even in poorer European Union countries such as Poland with the average income three times as low as in the United States, one liter – or one fourth of a gallon – of unleaded gas costs over $2.

Should the current trends continue, warn economists, gas prices may soon crash the $200 barrier per barrel. “As the lack of supply growth and price-insulated non-OECD demand suggest a future rebound in U.S. gross domestic product growth or a major oil supply disruption could lead to $150-$200 a barrel oil prices,” Goldman Sachs predicted in March. Only two years ago hardly anyone could imagine the world economy surviving the ineffable $100 a barrel with most experts forecasting mere $60 per barrel in 2012.

With almost $8 per gallon, European cars roll down the roads surprisingly freely. The reason why you do not see strikes similar to ones that recently blocked several American towns is the tumbling dollar. As oil extracted by underdeveloped rigs in the Middle East and Russia is later sold on the world market, the current strength or weakness of the American currency dictates how much drivers will have to pay at their gas stations. No matter what Jay Z thinks, it will be many years until the Euro substitutes the U.S. dollar as the world favorite currency.

“It is more than I would like, but I don’t panic,” says Marcin, a 29-year-old painter and decorator from Gorzow, a middle-size city in northern Poland. He just finished fueling up his Fiat Panda, a popular station wagon, that serves Marcin as his mobile office and depot and sometimes even as his bedroom. Every week he travels wide and breath of the country, selling paints and his skills to the growing number of homeowners. “High gas prices bother me, it’s true,” he admits. “But I laugh when I hear that Americans cry over $4 per gallon while here we have to pay twice as much and still manage to make profits.”

Gas in Europe is more expensive that in the United States because European governments mix it with dozens of various taxes. For example, for one liter of gas that Marcin pumps into his car almost every second day, he has to shell out 4.50 PLN, or $2 at the current exchange rate. The real value of gas, however, approximates to only a half of the price that Marcin and other Poles grudgingly pay; the remaining one dollar is divided among VAT, excise tax, profit margins of the gas station and transport company, additional taxes on the maintenance and building of highways, and a special tax on ecology.

The truth is that while oil prices are ever increasing, the weak dollar reduces the negative effect, at least in Europe. In fact, Poles and other drivers in the European Union now fuel up their autos for less than they did several months ago when the world market paid $100 a barrel, comparable to $124 per barrel in the first days of May. Europe has also another advantage over the United States: Russia’s vast resources of crude oil, second only to the supplies of some Arab states. Unpredictable and aggressive as it is, Russia remains the main exporter of natural gas and crude oil to the European Union for a highly competitive price.

This relative stability in Europe will not last forever, admit economists. Russia has already warned that due to the instability of the world oil market, it will be forced to significantly raise the price for its resources. Problems come also from within the European Union. The Euro, adopted by 15 out of 27 member states, has already dropped by several percentage points and the European Central Bank predicts the currency will continue the fall until at least the end of the year. Soon Europeans may find themselves in the shoes of Americans but instead of crying over $4 a gallon, they will face much higher bills.

But for Marcin this black scenario is the distant future. Now he worries whether he will be able to get on time to Warsaw, the capital, where he has a meeting with a potential client. “We buy more and more cars and pay more and more for gas but we don’t get more roads. What’s the advantage of cheap gas if I’m stuck in traffic?”

Krzys Wasilewski
Krzys Wasilewski, while living in Poland, completing his masters degree in International Relations, was seduced by English Literature.