The Cheapest Petrol in the World

After enduring escalating petrol and diesel prices for a good portion of 2008, many of us are relieved that 2009 has not brought the same painful increases and petrol shortages.  Although petrol is still expensive, its price has dropped to more reasonable levels this summer.  In fact, there are many places around the world that still enjoy petrol at extremely low prices.

Oil makes the world go round

Every country manages their oil supply in a different way.  Some countries are completely reliant on other countries to provide them with enough oil to provide for their citizens.  Other countries are more self-sufficient and are able to produce some of their own oil. Many countries also choose to include heavy taxes on petrol which causes the cost per litre to skyrocket.

In Britain, the final price for a litre of petrol is broken down into several parts.  The pump price includes both the VAT and petrol fuel duty.  There is also the cost of refining the oil, which is included within the retail price.  The petrol has to be delivered to the petrol station forecourt, which adds considerably to the costs.  The forecourt profit margin is also added into the overall price per litre of petrol.  These things all add up to create a large price tag.

Although petrol is still taxed in the United States, the taxation levels are much lower than other places across the world.  Petrol in the U.S. is not regarded as being particularly cheap by drivers as it once was. Depending on where you are in the U.S., petrol prices are around half of what they would typically be in Britain.

In the UK, the Government takes more than its fair share!

The U.S. happens to be the largest consumer of oil in the world.  It is estimated that the country uses 20 million barrels per day.  Luckily there are plenty of oil rich areas across America, which has helped the U.S. to become the third largest producer of oil in the world.  The U.S. is able to produce more than 8 billion barrels of oil each day, which still leaves the country heavily dependent on oil imports.  No other country comes close to the 12 million barrels of oil that the U.S. imports each day.

Along with lower taxes, government subsidies are another way in which a country can keep their petrol prices lower.  In China, the government actually has a cap on the cost of fuel which helps to ensure there is not a spike in the price of petrol overnight.  China produces more than 3 million barrels per day but consumes more than 7 million.  Other countries including Thailand, Pakistan, and India also subsidise their petrol prices.  The government absorbs the cost of the subsidy.

The Chinese Government absorbs oil costs as well

While a government subsidy might sound like a great deal, there are people who suggest they may be dangerous.  Citizens that never have to deal with expensive petrol will continue to consume the same amounts, if not more petrol than they always have.  As there is a finite supply of oil available in the world, it is thought that we need to become less dependent on the commodity before it runs out completely.

Some countries that are more self-sufficient and choose to tax their petrol on a smaller scale do still provide their citizens with cheap fuel.  This is the situation in Venezuela which is home to the cheapest petrol in the world.  In this South American country, petrol costs less than 2p a litre.  This incredibly low price is more than 50 times cheaper than the cost of petrol in Britain.

So how is it possible that Venezuela is able to provide its citizens with such inexpensive petrol?  As it turns out, oil is Venezuela’s greatest resource.  The country features the seventh largest oil reserve in the entire world.  But this is only part of the reason that petrol is so cheap in Venezuela.  The country could choose to export this cheap oil that they supply to their citizens and make a large profit from doing so.  Instead, the government subsidises petrol and avoids adding additional taxes onto the price.  This allows the people of Venezuela to save money by purchasing cheap fuel, which helps to boost the country’s overall economy.

Pretty and cheap!

Now do not assume that Venezuela saves all of its oil for the people.  In fact, Venezuela is one of the largest exporters of oil today.  It is estimated that they export 2.2 million barrels of oil each day.  The only countries that export more than Venezuela are the United Arab Emirates, Iran, Norway, Russia, and Saudi Arabia.

It is also a good idea to mention Venezuela’s membership of the Organization of the Petroleum Exporting Countries, or OPEC.  This particular organization controls a great deal of the oil reserves that are located around the planet.  OPEC members are responsible for the production of 40 per cent of the oil supply.  Along with Venezuela, other members include; Saudi Arabia, United Arab Emirates, Qatar, Iran, Kuwait, Iraq, Libya, Indonesia, Ecuador, Nigeria, Angola, and Algeria.

OPEC controls whether we'll be happy or sad day by day

The next time you are considering the price of petrol, make sure you think about OPEC.  Because they control so much of the oil, the actions they take directly affect the cost of the fuel that you buy.  If they choose to cut oil production, expect to wake up in the morning to higher fuel prices.  If they choose to ramp up production, everyone will breathe a sigh of relief as the prices settle back to more reasonable levels.

Other members of OPEC such as Nigeria, Kuwait, and Saudi Arabia also enjoy lower fuel prices.  However, none of these countries can compete with the low petrol prices that can be found in Venezuela.

Cheap petrol prices can also be found in Russia.  This country is the second largest producer of oil.  Russia also consumes much less oil than they actually produce which allows them to be the second largest exporter of oil.

Cheap oil in Russia - but would you go there?

While today’s petrol prices may seem painful considering the low petrol prices that can be found in other parts of the world, keep in mind that many places are forced to pay much more for their petrol. The Netherlands endures extremely expensive petrol thanks to a variety of different taxes that are added to the actual cost of a single litre.  Taxes account for nearly 70 per cent of the price of petrol.  Places like Norway, Eritrea, Sierra Leone, and Bosnia also suffer from high petrol prices.