Taxes and Fees Not Included: Governments Choose Cars and Fuels

Most Americans believe they are already paying too much for gasoline, but drivers in most of the rest of the developed world are paying a lot more. Over many decades, most European countries and Japan have introduced heavy taxes on gasoline and on cars themselves, making it much more expensive to own and drive a car than in the United States.

Consider the above chart, (easier to read in this presentation) representing retail gas prices in November 2010, when Brent crude was still only $81 a barrel, against $114 today. The average U.S. price for gasoline is shown as 76 cents per liter, which translates to $2.88 a gallon.

If you look to the right of the chart (where it says “Country Category 4”), you’ll see that Romania has almost the least expensive gasoline in the European Union, at almost twice the price in the U.S. If you keep looking further right you’ll see how high gas prices already were in much of Europe before crude went up more than 40 percent in just three months.

Gas is taxed at roughly 15 cents per liter in Brazil, making it relatively expensive and providing the main incentive for the rapid switch to ethanol- and butanol-based fuels. In the United States, tariffs, subsidies, and a federal mandate ensure that a blended ethanol-gasoline mix finds its way into nearly every gas tank.

In passing, also note that Norway, despite its massive oil reserves, taxes cars and their fuel as heavily as any other country in Europe. No sign there of the fuel subsidies prevalent in other oil producing countries like Saudi Arabia, Kuwait, or Venezuela.

Driving State Revenue, Incentivizing Not Driving

In Europe, car taxes were initially created to cover the cost of building and maintaining roads, but over the years they would grow to cover hospitals, police, etc, and now typically fund much more. Then came the additional objective of suppressing the number of private vehicles by heavily taxing both their use and purchase. In most European countries, there is a ‘special car tax’ in addition to the VAT or sales tax. (No other consumer product is obliged to carry such a tax.)

As an example of how the retail prices of cars vary within Europe, consider this: In the UK, a MINI Cooper has an on-the-road price of around $24,000—already pretty expensive compared with a price of around $20,000 in the U.S. However, a similar car in Denmark would cost more than $55,000, with most of that difference due to its initial ‘registration fee.’

Up against heavily-taxed conventional cars, electric vehicles should prove very competitive in Denmark even without subsidy—provided the Danish government continues to exempt them from the registration tax. With this in mind, it’s no wonder that Better Place has set up shop in Copenhagen.

Diesel Tax Conspiracy?

Diesel Prices

Diesel is taxed less heavily than gasoline in many European countries, despite it having been EU policy for years that there should be parity. Bear in mind that a gallon of diesel produces more CO2 than a gallon of gasoline, so there is an environmental argument for a higher level of tax on diesel, which several countries have implemented. Consequently, in Switzerland the diesel premium is roughly the same as it is in the U.S., while France, Germany and others persist with significantly lower levels of tax on diesel.

This tax anomaly has the effect of distorting the cost justification for buying a diesel car. On current French numbers, diesel starts with an 11 percent advantage over gasoline even before taking account of the relative fuel consumption. It’s hardly surprising that so many French cars have diesel engines.

It has been suggested that the main reason France and Germany have kept diesel taxes relatively low is to help their own manufacturers compete with foreign imports. As the case for diesel cars is less strong in most of the greater global market, foreign manufacturers might put less effort into developing diesel engines in the coming years. It’s probably one reason why Honda has announced it will still launch a new small diesel engine in Europe next year, despite reportedly giving up the development of larger diesels.

A Hybrid for All Seasons

Battery-only cars could very well be outpaced in the global market by plug-in hybrid platforms with the capacity to add or subtract battery modules depending upon the individual needs of different regions.

A hybrid running on low-tax biobutanol for example should produce stunningly low overall emissions and be relatively cheap to buy and run in most countries. Throw in the option of a few 20-mile plug-in battery modules—say, two in France, none in Brazil, one in the UK—and you have a scalable platform capable of benefiting from high-volume production discounts while also being able to provide the right amount of all-electric range for any market.

The reality is that most cars worldwide will still be running on liquid fuels all or most of the time in 2020 and for years beyond. Carmakers need to minimize overall fuel consumption as rapidly as practical by implementing solutions that are, above all, broadly affordable, rather than just providing a niche product for the wealthy.

Subsidies have been useful in getting plug-in vehicle production flowing, but few governments will feel able to afford to subsidize real volumes for more than a few years. In addition, some are already seeking ways to replace the tax revenues lost from reduced fuel consumption by creating road fees for drivers of electric cars.

Will battery costs drop quickly enough to allow manufacturers to build market momentum before governments decide they can no longer afford to subsidize plug-ins? We shall surely find out.

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  • Max Reid

    Main reason for gasoline being cheaper in US is that the Oil companies dont pay royalties for the Oil they produce here from fields that we discovered since 1970’s.

    Also since Oil is prices in Dollars and the Petrodollars being reinvested in US, this country gets enough investments to buy Oil. But in rest of the worlds, its a different story. Keeping Gasoline & Diesel cheap means people will buy more of it sending their money overseas.

    As Europe feels the debt pressure, expect their people to give up the cars for public transport. China and India will buy cars, but most of the time people will take public transport and also these countries are investing heavily in Rail transport.

    Slowly US will also feel the pressure. Already the vehicle sales have come down to 12 million / year in the last 3 years compared to 16 million vehicles + until 2007. All those SUVs & Pickups built with V8 engines will give way to CUVs and Vans will smaller engines.

  • Normo the Big

    Max, your post moves me to reply even before my first coffee of the day. In the UK, where I live over, 75% of the cost is tax paid at the pump. Fact. Nothing technical with royalties etc.

    Also, diesel cars are late-comers to the UK market. Their attraction is better miles per gallon. Simple.

    I would not expect people to move over to public transport until fuel gets way more expensive than it is now. Like in the US, people prefer their cars.

  • JamesDavis

    If America keeps screwing the poor, like Europe did, by taxing us to death; we are not going to leave here like we did Europe. America is going to have another Civil War on its hands and this time it will be the government’s blood that will spill. You can’t tax people to the point where they cannot afford to support their families or go to work. You can only push people so far before they start fighting back. Isn’t the uprisings in the East teaching you anything?, or is that what our government is working toward? You want a blood bath like Egypt and those other countries are having now to overturn their tyrant. worthless, overbearing governments. It is not supposed to be like that in America. We have the most advanced technology in the world that will allow us to get completely away from fossil fuel in less than ten years, and if America don’t start taking steps to do so, it could cost you more than you are willing to pay. We, the people, are not as stupid as you think we are. If we are willing to give up our lives to protect America in foreign lands, we are just as willing to give up our lives to protect Americans on our own soil. Don’t force the peoples hand, it may be more than you bargin for.

  • Mr. Fusion

    Agreed with James Davis.

    I am so sick and tired of hearing the old “Don’t complain about gas prices, they’re cheaper than most of the world” argument.

    What about all our other taxes that that make the cost of living in this country so high? Especially now.

    So go ahead and raise the fuel prices to that of Europe without an affordable alternative and infrastructure support for all modes of transportation. See what happens to this country.

  • forestsable

    Angry much James?

  • Max Reid

    Mr Normo

    What does it mean by “Fact. Nothing technical with royalties etc.”

    Gas in Canada (Oil exporting country) is more expensive than Gas in America (Oil importing country). Reason : Canadian government takes royalties, while American government does not.

    40 % of the World’s oil comes from few OPEC Countries. The more gas you buy, more money goes out of your country.

    America’s debt is 14.2 trillion and the GDP is 14.8 trillion. So the debt is 95% of GDP, if it crosses 100%, then the country will lose its AAA rating and the interest rates will increase. This will cause more outflow of money and hit the poor & middle class harder.

    Its time, we start looking at all types of alternatives whether it be CNG / Ethanol / Electric.

  • JamesDavis

    Not much. This economical disaster didn’t befall America until Bush got into office and I am just tired of hearing all the lies and excuses about these stupid high prices that is turning our country into a country like the country we all left several hundred years ago. There you had the ultra-rich and the ultra-poor – the ultra-smart and the ultra-stupid, and now, here, we are becoming the ultra-rich and the ultra-poor – the ultra-smart and the ultra-stupid. Doesn’t that piss you off just a little bit?

  • Paul Scott

    James, there is an alternative to paying ever higher prices for gas – electricity. The new EVs coming to market are really well designed and their efficiency and performance are fantastic!

    I’ve been driving an EV for over 8 years and powering it with kWh I generate from the sunlight falling on my roof. My electric bill has averaged a mere $100 for both my house and car since 2002. I’ve driven over 90,000 miles on sunlight. The ROI for my solar system is over 10%, and as gas prices increase, it approaches 15%. The solar system will have paid for itself this year, but it’ll last decades more, essentially the rest of my life.

    EVs are only a bit more expensive than comparable gas-burners now, but after the tax incentives and rebates, they are on par with equivalent gas cars. The cost of operation, however, is much less. Buying kWh instead of gallons of gas saves you at least 80%, and as a bonus, your money stays local to your community, most of it staying in your pocket. Also, EVs require virtually no maintenance, saving even more money.

    We need to increase taxes on gas to pay for the external costs of oil that currently go unpaid. The wars for oil have cost us close to two trillion in the past 15 years. A RAND study concluded that the U.S. spends about $75 million each year on military costs protecting our access to oil. The pollution from burning gas and refining oil kills thousands of our fellow citizens every year. The oil spill disasters like we saw in the Gulf last year cost us billions more. On top of that, we give the oil industry about $80 billion in direct tax incentives every year – this to an industry that makes billions in profits every quarter!

  • Max Reid

    Paul Scott the Great : My sincere appreciation to you for running the EV on PV (Solar power).

    I have a Prius and commute only 6 miles round trip to train station. If I move to different place and have to commute more distance, then I will change my vehicle to plugin with some 10 mile range.

    The $75 million spent to protect Oil is much lower figure. The nation’s military budget is $ 600 billion, even if we spend 1 / 12 of it in the Persian Gulf, it comes to $ 50 billion. That money is purely a subsidy for Oil. There is no reason to defend the dictators and religious states with our tax money. Just divide that money by 200 billion gallons of Gasoline & Diesel and it will work out to 25 cents / gallon. This subsidy has been going on for 6 decades.

  • Nasdram

    Why would anyone complain about cutting subsidies for oil i can’t imagine. Its not like you don’t have to pay them back in one form or the other. And if it doesn’t get compensated by taxes somewhere along the line, it just piles up as debt.
    So better pay the true cost (also in terms of health issues for the population) and be able to change your way accordingly to a better alternative than live in a fantasy world.

  • JamesDavis

    I agree with you 100% Paul Scott, and I am behind electric vehicles 100% – have been since I was a little boy, but how do we stop our auto makers from dragging their heels and start mass producing them, bring them to market and make them affordable so the common worker can afford them. Most all common workers in this country cannot, even with government help, afford these fantastic electric cars, so they are stuck with this enormous price that it costs to operate fossil fuel vehicles and probably will be for the next 40 years. It takes a fraction of the cost, time and materials to build an electric vehicle as it does a fossil fuel vehicle, yet, electric cars cost more than the best made fossil fuel vehicle. Now, who can figure that one out and still keep an honest looking face pushed out there to the public?

    We will shell out billions of dollars to create things that can wipe us all right off the planet…nuclear reactors, but we will not spend a tenth of that to create things that can save us…electric vehicles, Geothermal, wave energy (both ocean and river) and solar (Even though solar has improved its energy production by over 400% since the 70s and lowered its cost of production by probably the same amount.). So how do we stop our ultra-smart and ultra-rich people from continuing to kill us with their ultra-dangerous fossil fuels?

  • Anonymous

    Read this link

    China had 1,266 MW of wind energy installed capacity, in the next 5 years, it has increased to 41,800 MW and has captured #1 spot in the world. At this rate, China will soon cross past 100,000 MW. Many countries are installing wind energy.

    Also the Worlds solar PV installed capacity has grown to 38,000 MW

    Its high time, we move the transport From Oil to Electric thru EVs & Plugins. The good news is that while the cost of Oil & Coal increases, the cost of Wind & Solar keeps coming down.

  • Anonymous
  • JamesDavis

    Anonymous, that is very noble of you to provide that link, but I think you missed the point. We want to get away from fossil fuels of all kind. They are too dangerous and destructive to the environment and human life to use as a source of energy. Hydrogen fuel cell batteries are great, but it is not great if you use natural gas (which is a fossil fuel that destroys the environment) to create it. Hydrogen can be produced without any fossil fuels and it is safer than any fossil fuel you can think of…its footprint is ‘0’ if you do not use fossil fuel to make it. Google hydrogen fuel cell batteries and see what you come up with.

    We want only electric cars that recharge from clean sources of energy like: solar, geothermal, wave energy and wind. WE NO LONGER WANT TO USE FOSSIL FUEL TO GET OUR BUTTS FROM ONE LOCATION TO ANOTHER! Can’t make that any clearer.

  • DownUnder

    Good point James, but that can’t be done overnight. It takes time (and education).

  • Shines

    JamesDavis you say, “It takes a fraction of the cost, time and materials to build an electric vehicle as it does a fossil fuel vehicle, …” Can you provide a link to or data to back how you determine this?
    I believe the major reason some automakers are reluctant to switch to EVs is because it is so cheap to build fossil fuel vehicles. I can buy a small car for $15K. The cheapest electic vehicle I am aware of is the Zen electric city car – which is very small and has a max speed of 35 mph – it costs $25K. There is world competition to build the best vehicles. If a country could produce a reliiable electric vehicle for cheap I am sure they would. The Nissan Leaf seems to be the best so far and its MSRP is over $30k. Ford is going to produce an EV this year and I bet it will start at more than $30k. I consider myself a realist. I don’t think there is any conspiracy to not build EVs. It is that the fossil fuel infrastructure is very well established and it will take time to change it. To see Nissan Leafs driving down the road is exciting – the change has begun. When I travel I see many wind farms across our nation – that is exciting also.
    Oh and I don’t think hydrogen is safe. It has plenty of properties that make it just as unsafe as most fossil fuels…
    In any case EVs are here to stay and their price will be coming down.

  • JamesDavis

    You know, “Shines”, that is the typical response from an oil drinker. Why would anyone need to provide a link to what they say just to condone your laziness. Read these magazines and reports for yourself. They are all right out there and free of charge to read. If you had just read the articles in this magazine and its sister magazine, or the reports on alternative batteries, you would realize that most all electric cars, like the Leaf was priced under $25,000.00 and the most comfortable ones under $35,000.00 until GM jacked the Volt, which is not an electric car and never will be, up over $40,000.00 and all the other auto makers followed suit. Compare the Leaf’s price in Japan or Europe to the Leaf’s price in America and you will see what I mean. The American auto makers are screwing the American people until they can milk fossil fuel for every drop they can and it is GM that is leading the pack. And I am not going to provide a link for you to prove what I just said. “Shines”, you are a lazy American and no one should condone your laziness.

  • Anonymous

    From the article: “As an example of how the retail prices of cars vary within Europe, consider this: In the UK, a MINI Cooper has an on-the-road price of around $24,000—already pretty expensive compared with a price of around $20,000 in the U.S. “

    Do you realise you are comparing the ‘on-the-road price’ in the UK with MSRP in the U.S. BEFORE taking into account sales tax, license fee payable?

    A better and fairer comparison would be listed price before VAT/license fee/road tax in the UK, i.e. GBP11,883.33 according to Mini UK web site.

  • Shines

    James Davis – If you had data to prove your point I would think you would be glad to share it so others could learn. However instead you choose to start name calling, which only makes me doubt your authenticity. You say read these magazines… what Hybridcars and I do read well enough thank you – Nothing I read (except your posts) says “It takes a fraction of the cost, time and materials to build an electric vehicle as it does a fossil fuel vehicle…”
    I will not stoop to name calling…
    On multiple sites (wickipedia being the most well known) the price of the Leaf in Japan is 3.76 million yen which is equivilent to $46323, In Britain it is 28350 British Pounds or $45586 and in the other european countries the price is 35000EU which converts to $49403. Here is the US it is $32780 – a relative bargain. Sure there were reports that the Leaf would sell between $25K and $30K and with the current government incentives you can get a leaf for less than $30k. Right now the average American worker may not be able to afford a new electric vehicle, but the fact that there are viable electric vehicles available says a lot. I remember looking at the first LCD tv’s prices at $20k. Now they are under $500. As battery technology and availability improve the price of EVs will come down. BTW if I drank any oil it would be either Canola, Olive or Fish oil (not counting bacon grease) 😀

  • JamesDavis

    “Shines”, I was not calling you any names. I was expressing a behavioral pattern you seem to always take “provide a link” when someone disagrees with your desires to continue down the fossil path or environmental destruction. I am not your teacher – it is not my job, and I have no desire for it to ever be, to teach you or anyone else about the dangers of fossil fuel or the benefits of a total electrical fleet of vehicles.

    To me, you just seem to be a lazy American who wants someone else do your work for you. Do you own research “Shines”, you will learn a lot more and you will appreciate the knowledge you gain a lot more.

  • Shines

    calling me a lazy American is not name calling? An oil drinker is not name calling? I believe my 2001 4 cyl Camry uses less fossil fuel than your Mustang or F150. No where in my post do I desire to “continue down the fossil path or environmental descruction”. I like you wish I could afford an electric car. I do have an electric vehicle – in that I have an electrical assist bicycle which I commute to work in when the weather cooperates. At least some days of the year I travel without using fossil fuels or causing environmental destruction. As far as no desire to teach me or anyone – well, keep posting – I learn something every time you do. ;-p

  • JamesDavis

    I am very proud of you, “Shines”, you can understand when you want to and I am glad to hear that you are a good environmentalist – sorry “Shines”! I didn’t mean to call you that name. Hang in there “Shines”, you will get the hang of it eventually.

    I express myself differently than you do, but that doesn’t mean I am calling you names. None of those descriptive words are proper nouns…they are descriptive observations and that is not name calling.

    I know that you must be as upset as I am about our American automakers dragging their heels in providing us with affordable electric cars. You even got tired of waiting and bought yourself an electric bicycle. But, you know “Shines”, the American automakers still do not get the point.

    And I do not own a Ford F150…my brother-in-law and sister does. I am stuck with the Mustang until the Ford electric Fusion comes out on the market.

  • Cliff Sallas

    The price of gas would be close to the same price we are paying in the US except that the uk puts a 75% or more tax on their gasoline. Another reason why we need the government out of our lives. Obama wants to make you think that the price they are paying at the pump for gas is for the gas but that is a lie they don’t include the enormous tax that is placed on every liter.

  • tapra1

    taxes cars and their fuel as heavily as any other country in Europe. No sign there of the fuel subsidies prevalent in other oil producing countries like Saudi Arabia, Kuwait, or Venezuela. Best Dedicated Hosting

  • J.G.

    This is a very progressive website Which intent to make you think that by limiting your moving range buying a traceable trackable car which is GPS traced 24/7 since they are planning on a very near future to tax mileage since they wont make much money from gas and they will not tell you the downfall of Hybrids fuel cells because this cars have Fuel Cells “batteries” when this batteries go bad they are highly toxic and none reusable and when I mean toxic I mean 100 times more toxic than car emission fumes because of the mix of chemicals and active minerals inside. and they wont tell you that to create these batteries which most components comes from mines they are digging gigantic holes in other countries to extract the minerals. Honestly all this green stuff is a shuffle of wealth from capitalist to Progressives and communist, socialist around the world. Because the most unimportant thing they wont tell you ios that they can shut down your hybrid car from anywhere regardless of distance since they are satellite tracked. Thanks you for promoting more control from Government and to make redistribution of wealth more broad.