Monday, October 01, 2007

Price of a Pint

Beer v. Petrol

In my previous incarnation as a children's entertainer (school teacher) I had some favourite lessons I could always trot out when things were either not going very well – or when the class was in need of some thinking practice.

To get them thinking I would pose the question: why is beer four times more expensive than petrol?

Think about it. A gallon of petrol equals about 4 litres. Petrol is about a pound a litre – or is shortly to be according to the news media. That makes the cost of a gallon of petrol as £5 – to keep to round numbers. Beer is about £2.80 a pint for lager. That's about £11 pounds a gallon. Therefore, beer is about twice as expensive as petrol. Why?

Ask children this question and they will come up with some convincing answers. Beer is taxed highly by the government. Actually, half of the price of a litre of petrol is tax, for beer the numbers are less. Beer is a luxury commodity whereas petrol is a necessity. Possibly true, but that would be a reason for taxing petrol more – after all if beer is a luxury you can just stop buying it!

Just to complicate things, I would then ask the youngsters to consider what is required to produce a litre of beer and a litre of petrol. For beer you need some water (almost free) some hops (a plant that grows naturally and is, therefore a renewable resource). A brewery – some expense here in plant, buildings and machinery. A bottling plant to make your product easy to store and move about. A transport network with lorries to transport your product to the destinations. Pubs, clubs and supermarkets to retail the product.

For petrol the scene is seemingly similar – but much more expensive. For raw materials you need oil instead of water. To get the oil you need (in the case of North Sea oil) drilling rigs and pipelines – not to mention the costs of finding the oil in the first place! Then instead of a brewery you need an oil refinery. Very expensive kit required here. Then you need the same transport system as for beer – whacking great lorries to move the stuff to petrol stations. At the station you will need staff at about the same wages as the pub staff to retail the stuff.

In short, petrol costs far more to find, refine, transport and retail than beer. It is taxed more highly. Therefore, common sense would tell you that petrol must be more expensive than beer. Wrong, as we have seen.

It's actually half the price.

At this point kids would want to know the answer. I never had it. Still don't.

If anyone does know why beer is twice as expensive as petrol, I wish they would tell me.

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