This week, gasoline hit a record $3.83 per gallon for regular in the U.S. The spike may due to a lot of factors, but one thing is for sure, we’re not the only ones suffering at the pump – or the bowser.

Down Under

Bowser? That’s the Australian word for “gas pump” and they’re experiencing the same issues we have been, except worse. For one thing, they’re paying A$1.62 per liter for gas. That’s $1.56 per quart or $6.24 per gallon! In case you’re keeping track, that’s 62% more than we’re paying.

The median household income in Australia is A$55,000 – about $52,800 in the USA. While I had a hard time finding a current median income for American households, it is around the same amount nationally (many regions are much higher). That means the Aussies are making roughly the same as we are, but they’re paying much more at the bowser.

In addition, our interest rates have been falling, helped by the Federal Reserve Bank, which means that mortgage rates have also fallen. Their interest rates have been hiked 12 times since 2002, and inflation is completely out of control.

Recently, the Australian government issued a tax cut (sound familiar?) but it amounted to about $20 per week. That is actually a little less than the tax incentive package you and I will be issued. For a married couple with no children, the US tax incentive is about $23 per week.

Neither plan provides any kind of real “incentive.” Neither will fill a gas tank. $23 a week won’t even my tank halfway, and I drive a Corolla with an 11 gallon tank.

Up North

And our neighbors up north aren’t doing much better. Even though the depreciating US dollar has helped level our currencies ($1 US = $0.99 Canadian), they’ve always paid more for gasoline than we have.

Last May, gasoline was $1.12 per liter in Canada. Today, it is at $1.27 and rising. That’s roughly $1.28 per quart or $5.12 a gallon. So, our neighbors to the north are still paying 34% more than we are.

Like the USA, Canada’s economy is slowing dramatically. This really shouldn’t surprise us since the Canadian economy is to a large part dependent on the USA. The largest bank in Canada just announced a C$855 million write-down, and their Gross Domestic Product has ground to a halt, showing no growth over the past year.

Across the Pond

Of course, Great Britain is also struggling with rising prices for petrol. In November of 2007, petrol was £1 per liter. Now, it is £1.21, or $2.40. That’s $9.60 per gallon, or 151% more than we’re paying in the USA.

More than Australia, Canada or the US, the rising price of crude oil has really impacted the British pound. While the Euro continues to strengthen, the national currencies of the English speaking nations seems to be weakened. In other words, the English speaking people of the world are being leveled out with everyone else.

But just how big a crisis is this?

A Bit of Perspective

Although no one of any international importance is listening to me or reading my blog, I think there is an easy fix to this problem.

While the rising price of petroleum is not the only cause of gas prices’ skyrocketing prices, it is part of the problem. In May 2007, oil was at $66 per barrel. Last week, it crossed the $130 a barrel mark. In other words, the price of oil doubled since last year. One would expect that gasoline would also have doubled in price, but that is not the case.

If we use the EIA’s prices for all formulations, then gasoline only increased by $0.58 from May 2007 to May 08. That is an increase of only 18%over last year. Why does it feel like so much more? Because gasoline prices fell dramatically in the interim.

• 2007 opened with gas prices at $2.33 per gallon, but by Memorial Day weekend the price had risen to $3.21.
• In August of 2007, the average price had fallen to $2.75 per gallon.
• By mid-autumn, the price had crossed the $3.00 per gallon mark and has stayed there ever since.

This is shocking, isn’t it? Historically, the biggest Memorial Day to Memorial Day jump has not been 2007-2008 but actually 1999-2000 (39%), 2003-2004 (38%) and 2005-2006 (37%). The jump for 2007-2008 was only 12%. So why is it effecting us so much?

Much of the “sticker shock” of the current gasoline prices has more to do with what we are being told than what is actually happening. While gasoline is definitely more expensive, let’s just consider how much effect it really has on our lives.

• For the sake of argument, let’s go pre-9/11. Memorial Day weekend 2001, gasoline was $1.78 per gallon. That meant that if you had to fill a 15-gallon tank, then you would be out of pocket $26.70. (Incidentally, in Australia you would have been out roughly twice that.)
• This year, in the USA you will pay $3.82, so let’s assume you’re filling the same 15-gallon tank. It will cost you $57.30. That is a 141% increase for roughly the same travel (about 300 miles).
• But in 2001, you probably made about 80% or less than you make this year. That means you have more income.
• How much of your income is devoted to paying for gas? Let’s assume you make $40,000 a year and travel 300 miles per week. Then you will consume one tank of gas per week. To count for trips through the year, let’s increase it to 1.5 tanks.
• If you do the math, then you’ll find that in 2001 you were spending 6.4% of your income on gas. Now, you’re spending 11.1%. So, there’s a net increase of 4.7% of your income per week.

Is that really that much? Or are we just so used to thinking of gasoline as negligible that we don’t notice it?

Look at it from another perspective. As I pointed out above, the Australians make about the same as we do. But they pay 62% more per gallon of gas. That means that the Aussie family spends 18.3% of their weekly funds on gasoline. The Brits are even worse off. If they drove as much as we do (which they don’t), they would be spending almost 29% of their income on gasoline.

A Solution

So, now I want to propose a solution to the crisis. It is quite complex, but here it goes.

Walk.

Ride a bike.

Consider this simple solution I found. For an extra 80 minutes a day (that’s less than the time most Americans invested in watching the American Idol finale this past week), I ride my bike to work. My part-time job is about 10 miles away, so it would consume roughly 0.71 gallons of gasoline per week to drive there and back. I ride my bike twice a week, so that’s 1.42 gallons or $5.42. Additionally, I try to walk or ride my bike to any place under 2-3 miles away from our house. You would be surprised how much we drive our cars for little things.

Beside that, when you go shopping try this little trick. Plan ahead, park somewhere convenient to all the stores you need to go to, and walk among the shops.

Here’s another solution.

Eat out one time fewer per week.

The last time my family of three went out to a restaurant, I paid about $35 plus tip. That is nearly a tank of gas, roughly 9.16 gallons of gas. We generally eat out once or twice per week, but if we adjust that and stick to it, there is more than enough money to pay at the pump.

The solution is not to waste gasoline, to not assume. It works for the British and the Australians who simply adapt their lifestyle. Perhaps we Americans need to do the same.