Back in November, the ‘cost information’ website howmuch.net made an infographic about how long you’d have to work for, at minimum wage, in order to buy a gallon of petrol. And like the big mac index, the cost of fuel is also a quick estimate for the cost of living in a country. Here it is:
Of course, there are some issues here. The index is calculated using the internal price of fuel and the country’s minimum wage. In most cases, that is fine. But sometimes, there are problems. For example, one of those red countries is Uganda. According to the index, you’d have to work 350 hours in order to earn the $3.50 required to pay for a gallon of gasoline.
But this is because the Ugandan minimum wage was frozen in 1984 at 6,000 shillings per month. In the years that followed, Uganda had a bout of hyperinflation, replaced its currency, and never went back and revised that number. Today, low income workers will earn 900 shillings per hour – so for all intents and purposes, the country does not have a minimum wage.
On the other side of the scale, you have Venezuela with its deeply-subsidised fuel. And its short 11 minutes to earn enough to buy a gallon.
But putting those outliers aside, this picture really illustrates the disparity between rich and poor countries. Because fuel is such a highly-traded global commodity, its pricing is somewhat independent of domestic income levels. And it means that fuel in a country like Norway, which has some of the most expensive fuel in the world, is actually really affordable.
Just compare that chart above to these:
The ‘Cheap’ Countries for Petrol
The ‘Expensive’ Countries for Petrol
Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at www.facebook.com/rollingalpha.