The UK shipped 1.85 million barrels of gasoline and gasoline blending components to the United States in May, the highest monthly exports of those products since December 2021, Bloomberg News' Julian Lee reports, citing data from shipping analytics company Vortexa. On the face of it, the flow of gasoline from the UK to the U.S. looks counterintuitive to market forces as UK gasoline prices are $3 a gallon higher than the gasoline prices in America.
But gasoline in the UK is taxed much more than the levies on gasoline in the U.S., that's why British drivers pay much higher prices at the pump, as do most other motorists across Europe.
If taxes are left out of the equation, it actually makes sense for UK exports of gasoline and blending components to flow to the United States, Bloomberg's Lee notes.
Regardless of how much various taxes weigh on the final price consumers pay and the specifics of the different markets, gasoline prices in the UK and the U.S., and in many other countries, are breaking records these days. That's because crude oil prices are at $120 per barrel, global refining capacity has shrunk since COVID, and the Russian war in Ukraine and the subsequent Western sanctions on Russia are upending trade flows of crude and refined products.
Gasoline prices in the UK—where total taxes on gasoline account for an average 46% of the retail price, per the UK's motoring organization RAC—saw this week the highest daily price jump in 17 years. The average UK gasoline price this week was the equivalent of more than $8.60 per U.S. gallon.
Records continued to be broken in the following days until the average cost of filling a 55-liter family car passed the £100 ($125) mark, the first time in history that drivers are paying triple digits for a full tank.
The UK government cut fuel duty by the equivalent of $0.062 per liter in March, but wholesale gasoline costs have already jumped fivefold that amount since then, RAC fuel spokesperson Simon Williams said on Thursday.
Related: OPEC+ Fails To Meet Output Target Once Again
"A further duty cut or a temporary reduction in VAT would go a long way towards helping drivers, especially those on lower incomes who have no choice other than to drive," Williams added.
Even at $8.63 per gallon gasoline, the UK is not the most expensive fuel market in Europe. Drivers in the Netherlands and Sweden pay more than $9 a gallon, while gasoline prices in Finland, Denmark, and Norway—traditionally the most expensive markets in Europe—are now paying more than $10 per gallon, according to GlobalPetrolPrices.com.
That's no consolation for U.S. drivers, who are now paying a national average of $5 per gallon, for the first time ever, and there is no immediate relief for the pain at the pump in sight. Gasoline demand is rising despite record-high prices while gasoline stocks dropped again, per the latest EIA weekly inventory report.
Gasoline inventories decreased by 800,000 barrels last week and are now about 10% below the five-year average for this time of year, the EIA said on Wednesday. At 416.8 million barrels, U.S. crude oil inventories are about 15% below the five-year average for this time of year.
"This dynamic between decreased supply and increased demand is contributing to rising prices at the pump. This coupled with increasing crude oil prices means that the price of gas will likely remain elevated for the near future," AAA said in a Thursday comment on the soaring gasoline prices.
The sky-high prices are a serious threat to Democrats in the mid-term elections in November, as Americans will vote with gasoline prices in mind, a new ABC News/Ipsos poll found earlier this month. Gasoline prices will be an extremely important issue in the mid-terms for 48 percent of Americans—the highest percentage an issue has garnered for being "extremely important." Another 26 percent of Americans see gasoline prices as a "very important" election issue, the poll showed.
President Biden's various efforts to tame soaring gasoline prices haven't dented pump prices, and there isn't much a president—even the American president—can do to lower gasoline prices in a free market when crude oil prices are at $120 per barrel amid upended global oil trade flows.
This week, U.S. Treasury Secretary Janet Yellen said she didn't expect gasoline prices to fall anytime soon, but she didn't expect a recession either.
"I know people are very upset and rightly so about inflation, but there's nothing to suggest that a ... recession is in the works."
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com: