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Price of gas in Sweden

 

The price of gasoline (bensin in Sweden) in Europe has always traditionally been higher than in the USA.  There are several factors for this.

 

Weak Dollar:  One of the first reasons at the time of this post is the weak dollar when it comes to exchange rates.  The USD is about 6.3 Swedish Kronor.  To put it in perspective has been as high as 10:1 15 years ago.  The dollar is also running at about 1:1.3 to the Euro respectively.  Now, if you adjust the exchange rate to 10:1 that comes out to about $5.35/gallon.  However, this is an unnatural exchange rate for Skrona:USD, 8:1 is probably a more reasonable exchange rate historically.

 

The Octane Factor:  One of the arguments historically is that gasoline is more expensive in Europe because they only have high octane gas vs the USA, where we have a choice of 87, 89, 91 and 93 octane.  Let’s explain octane for a second. The higher the octane rating for a fuel, the more expensive it is.  This is simply because it has to go through a higher grade of refining to produce that octane.  Which is why 87 octane is $3.87/gallon and 100 octane is $10/gallon.  There are two common ways that Octane is rated, RON (Research Octane Number) and MON (Motor Octane Number).   RON will produce a higher number than MON for the same fuel. Sweden, like most European countries rates their fuel as RON.  The USA mostly rates on a (RON+MON)/2.  Sweden offers only 95 RON for anyone using gasoline.  This equates to about a 92-93 octane rating for (RON+MON)/2.

 

Volume Production:  Another big factor as to why fuel is so much cheaper in the USA is that we are an oil producing country.  In the last 5 years we have reversed the oil production decline since peak oil of 1970.  We not only produce lots of oil, we also have a very high volume of overall consumers which drives competition amongst producers and keeps the prices down.  Personally, I don’t see why we couldn’t have pump gasoline down to $2/gallon given our production.

 

Taxes:  Europeans (Norway is an oil producing exception) mostly believe that about 1/2 of their gas prices are in taxes.  However, if you’re not an oil producing country, you’ve got to be paying a stiff price to bring in that oil.  And if it is already refined to gasoline, you’re paying the refining fees to someone in another country.   So, if I take that $8.50/g and adjust it for a reasonable (8:1) exchange rate, it comes down to about $6.68/2= $3.34.  Take your current price of California gas at $4.00/g for 91 octane less taxes and you’re at about $3.50.  So, the theory is probably accurate.

 

I haven’t actually tuned much on European gasoline, so I don’t hold much of an opinion on how knock resistant it is.  But if the car manufacturers are any indication, most sports cars available in Europe for domestic sale typically produce more Horsepower than their US counterparts simply because they can have higher boost, more compression and more aggressive ignition timing due to the higher quality of fuel.  At the same token though, it is an absolute waste for Sweden to only be offering 95 RON, when modern technology such as turbocharged direct injection allows for boost + 10:1 compression on 87 Octane.  But I can understand how in a small country like Sweden the infrastructure has to accommodate a wider variety of cars.  If they all of a sudden switched to 90 RON, then there would be lots of old cars that would slowly destroy themselves.

 

Politically, Sweden is probably trying to discourage people from driving cars and load the public transportation system more.  In the US, fuel is a necessity.  Instead of increasing minimum wage and burdening business growth, subsidizing a staple such as gasoline down to say $2/g would probably do more for the economy, commerce and people’s pocket books.  Yes, I know our fuel here in the USA is cheap, but it should be.  We’re an oil producing country.

2 Responses to Imagine Paying $8.50 Per Gallon for Gas

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