2011 February 4

The Master Resource Report  2011-02-04

How much coal is enough for China? (page 1 )

North America’s energy use. (page 2 )

Three very different forecasts for the future. (page 2 )

Jet fuel is now 33% year-over-year. (page 3 )

Positive data on a smart grid study. (page 4 )

Printable Lithium-ion batteries. (page 4 )

What makes up the price of a gallon of fuel? (page 5 )

How much did your petrol cost?

This week in the Seattle area the $4/gallon target for diesel came very close. One station which is always amongst the highest hit $3.99 while most were in the $3.80 per gallon range. Premium gasoline is running a close second with prices around $3.70. All of these are at major retail outlets.

Now if it makes you feel better consider the price for petrol in the UK is £1.28 per liter. In the UK of course they are buying in liters priced in pounds so it does get a little confusing. So to keep it simple here is the reality. £1.28 ($2.07 U.S.) per liter x 3.7854 (1 Gallon = 3.7854 Liters) = £4.85 ($7.78 U.S.) per U.S. gallon.

Now for the reality check. The average household in the U.S. use 1,143 gallons of fuel per year which was covered in the January 7th issue of the Master Resource Report. Therefore if U.S. consumers were on average paying the same price as UK consumers the annual fuel bill would be about $8,900 per year.

Even more important as I mentioned in that January report for rural households it would be much higher reaching $11,600. When considered in light of the median rural household income of $40,785 that level of fuel cost would consume 29% of household pre-tax income in 2008. Add home heating cost to that and the impact on rural household or any household at that income level rural or not would be an economic disaster. So for those who simply say we should just raise the price of fuel to European levels to reduce consumption clearly do not understand the relationship between those prices and incomes. (Remember that median means half are above and half are below, it does not mean average.)

And for the median household in the U.S. in 2008 consuming the average gallons it would take 17% of the median income of $52,029. No, we won’t see $200/barrel oil in real 2008 dollars; the U.S. and world economy will have stopped well in advance of that price.

This week’s report has a breakdown of what makes up the price of a gallon of gasoline and diesel fuel on the last page in both percents and cents.