April 2, 2008
The Cost to Fill ‘er Up in Beijing
Here’s a picture I snapped of the pump yesterday after filling up the car with gas:
RMB240 is around US$34.23 at current exchange rates. I put 44.94 liters in the tank, which is around 11.87 gallons. The price per liter is currently RMB5.34 or US$0.76, and one gallon is around 3.79 liters, so the price per gallon is around US$2.88.
Now you may ask, how can the Chinese afford to pay around the same price that Americans pay for gas? The answer is the vast majority can’t, but there’s a large and rapidly growing middle class here who can.
April 2nd, 2008 at 7:36 am
Indians pay US$4.74 per gallon at this exchange rates..ie thats I guess most expensive. Government control oil companies and prices of gasoline. Already all state run oil companies gone bankrupt and they wanted to raise gas prices by atleast 15% to stay in business. Since Govt hold majority stake in oil companies, they issued a oil bonds worth millions of $. If oil prices stay above $100, Foreign investors in India will run away…
April 2nd, 2008 at 7:44 am
kods: Gasoline prices are heavily subsidized in China too, but I don’t know what the long-run implications of doing this mean — I’m a simple country boy.
April 2nd, 2008 at 11:43 am
In California (Bay Area) we’re paying north of $3.60/gallon, so $2.88 sounds pretty good to me. We haven’t seen prices below $3 for quite a while. I tend to view that as a good thing because the market may actually change American consumption patterns (downside of course is the staggering amount of cash shipped out to oil-producers). If the number of hybrids I see is any indication, the change has begun already. Toyota’s March U.S. sales are down 10%, but demand for the Prius is way up.
April 2nd, 2008 at 12:14 pm
dgd: Yes, I realize now that $2.88 is a price of the past in most (all?) of the US. My last frame of reference is when I lived in New Jersey in 2001 and used to pay $0.99 a gallon. It *is* a good thing if it gets those soccer Moms out of their white Denalis, but as you note in the meantime Saudigroup is able to snap up many of our precious assets (like the Citi) on the cheap — sickening.
April 2nd, 2008 at 11:21 pm
Hey CM, in New Jersey,it is around $3.10 for regular now ….
April 3rd, 2008 at 12:40 am
We’re at about $3.35/gal. in SW FL.
April 3rd, 2008 at 1:13 am
Paulson gave an interview on CNBC a couple of days ago and they asked him if he was comfortable with the level of foreign investment in US Financials, I believe they specifically referenced Citi. He tried to spin it–’We’re not afraid of foreign investment, we welcome it’–as if our most fervent hope is to transfer ownership of premier financial assets at fire-sale prices to people who do not share our interests. What BS. He’s trying to deflect blame, like Greenspan refusing to acknowledge any role in the creation of the housing bubble.
April 3rd, 2008 at 10:27 am
@mike & Todd: Thanks for the gas price reports … time to send those Escalades to the Crusher.
@dgd: Well, it’s a free market, right? The US government certainly welcomes foreign investment in the bonds it issues, so why have a double standard when it comes to publicly-listed equities?
April 3rd, 2008 at 12:45 pm
Also, to the extent Dubai and other Emirates, and places like Saudi Arabia, become more involved in Western business methods, western businesses, and finance, that’s a good thing. You don’t invest in a place to wreck it.
Our problems are not foreigners, it is us.
April 3rd, 2008 at 2:11 pm
Finn: I agree. But perhaps only when European and American houseboys become common among Chinese and Arabian-peninsula families, will folks begin to wake up.
April 3rd, 2008 at 7:05 pm
It’s 4.80 euro per US gallon in Ireland, but with exchange rate that works out at $3.05
April 3rd, 2008 at 8:09 pm
Declan: You’ve reversed things there and it works out to around US$7.53.
April 5th, 2008 at 8:24 pm
It’s 1.40 Euro per liter (and higher) here in Germany (~ 2.20 USD per liter, ~ 8.40 USD per gallon…). Even calculating with a higher USD/EUR exchange rate, let’s say 0.85 instead of 0.65, it would be over 6 USD per gallon. So be happy in US & China!
(http://www.spritmonitor.de/de/verlauf_der_kraftstoffpreise.html?timerange=3)
April 5th, 2008 at 9:33 pm
j.: You have to adjust these things for purchasing power … think about $2.88 a gallon in China when the average monthly wage in Beijing is (I’m guessing) around US$500.
April 24th, 2008 at 10:14 pm
Well, even with our Petrobras drilling enough for our internal demand, brazilians are paying around USD 4,90 for a gallon. What’s the use of having your own oil company when you’re charged international prices? Thank brazilian shark-wise taxes (almost 60% tax over fuels…) and the neo-liberal mindset that has put shareholders in a god-like position.
April 24th, 2008 at 10:53 pm
Yragael: Shouldn’t Petrobas sell to the highest bidder, no matter where they are located? Does it make sense to think in national terms anymore?
May 8th, 2008 at 3:34 am
How can the Chinese people ever afford $2.88 gas price?
Think about the new middle class crowd, don’t use the misguided national average income, then you can see the picture better -
There are 200 million new “middle class” people emerged in China now earning $5,000 or above annual income, not much but its a large base. Then following the 20-80 rule, 20% of that group which is about 40 MM people make north of $20k per year. Although its only 3% of China’s population, it’s the same population in whole Canada! The number is growing fast, and the income level and accumulated cash saving power is also growing fast. This group has a huge consuming power and that is the fact perhaps being overlooked by the western world.
Sure the majority of the people in China is still poor, but the top consumer group is large enough to support that market.
May 8th, 2008 at 6:26 am
RMB: Thanks for the comment… I don’t know how accurate the 200MM above US$5,000 in income figure is, but I do know that the people I work with in Beijing all qualify as “middle class” — even the new graduates make a starting salary approaching US$10,000 and every “senior manager” makes over US$50,000.
One guy I know claims that there are no more than 20MM people in all of China who have an annual income above US$5,000.