Thursday, September 20, 2012

Petrol perspective

People complain about the price of petrol (“gasoline”). Sometimes they complain a lot. The prices are among the most volatile for products we need on a regular basis, and the price movements—especially upward—seem, from our perspective, so random and unjustified that we tend to take a price hike almost personally.

I think that a little perspective is a good thing.

Today one of my e-friends mentioned the price of petrol where he lives. Apparently premium is US$4.29 which, he reports, is up nearly 30 US cents in one week. Here in New Zealand, premium unleaded is today retailing for about 7.09 US dollars per US gallon, and regular unleaded is about 6.84 US dollars per US gallon. Similarly, a 30 US cent per US gallon increase in price is just under 10 NZ cents per litre; I can’t remember that big a jump in one week.

He asked me how we cope with prices at those levels, and the answer is really just that we always have. Most of the price of petrol in New Zealand is tax, and retailers get around 4 NZ cents per litre in profit, give or take. This obviously affects everything else: The cost of transport is passed along in the prices we pay for food and all other goods, making them higher than they might otherwise be—which is also true of wages, further driving up prices.

As in most other Western nations, the wealthy take little notice of all this, and the middle class somehow manages to cope, though most middle class families rely on two incomes to get by. The poor and working poor suffer the most, especially in places with poor public transport (which includes Auckland, but that’s a topic in itself). As petrol prices rise—and low wages do not—poor families often have to cut back on other things, like food and clothing, in order to put petrol in the car so they can get to their low-paid jobs.

Recently, TV3’s Campbell Live looked at the real-world impact of our current government’s economic policies by looking at the lunches of kids in a classroom in a school in a high-income area as well as in one room in a school in a low-income area. It’s an imperfect examination, of course, because it showed only two rooms—but the reality is indisputable (despite what the current government thinks, poverty is real). The video is online—check it out for yourself (I think, but I’m not certain, that the video is viewable overseas).

In the June 2011 Quarter (the most recent I could find online), the median income in New Zealand for those receiving wages and salaries was $800 per week (around $41,600 per year). “Median”, of course, is the point at which half the people receive more and half receive less—the middle point. The median household income in that same period was $1,289 per week (around $67,000 per year), and this is how families get by—two or more incomes in a household.

In the time since that quarter, wage growth has been slow and unemployment has remained stubbornly high. On the other hand, inflation has been relatively low, despite fluctuating petrol costs, and interest rates remain low. This is how the middle classes manage to tread water, though the working poor are finding that increasingly hard to do.

So the price of petrol, its impact on an economy and people are relative, but the challenges are similar. This is why I think it’s good to keep a little perspective when complaining about petrol prices and so many other things.

Here’s a tip: It’s easy to work out petrol price AND currency differences at the same time using Google. To convert NZ prices per litre to US prices per gallon, for example, I’d enter the price of regular unleaded and what I want to know, like this: 2.179 NZD per litre in USD per gallon (NZD is NZ dollar, of course, and USD is US dollar). Going the other way—to convert that premium unleaded price to what we would pay in New Zealand—just reverse the chain: 4.29 USD per gallon in NZD per litre (roughly 1.36756137 New Zealand dollars per litre, btw). This is also how I worked out what the US price increase would be in New Zealand: 30 US cents per gallon in NZD per litre. These calculations are a little rough, and depend partly on how good the exchange rate calculations are, but hey: It’s Google! It’ll be pretty accurate.

The photo with this post is by Daniel Schwen, via Wikimedia Commons.

1 comment:

Roger Owen Green said...

I think the real complaint about gas prices is that it seems manipulated. and random - gas was DOWN around Memorial Day and UP around Labor Day; not the way it usually works.