From the Bloomberg.com article "U.S. Record $4 Gasoline Remains a Bargain in Europe (Update2)":

Gasoline prices are so high that Exxon Mobil Corp. Chief Executive Officer Rex Tillerson appeared on NBC's Today show two weeks ago to explain why fuel costs so much.

"This is a demand-driven price run-up,'' Tillerson said on the program. Economic growth in China and India "lifted tens of millions of people out of poverty. That's a good thing,'' he said. "The negative effect is huge demand for energy and that has put a lot of pressure on the price.''

The Pain

Americans expect gasoline will only get more expensive, with 78 percent anticipating $5 a gallon next year, according to a CNN/Opinion Research Corp. poll released this month. Sixty percent of the more than 1,000 adults contacted April 28-30 said fuel costs have caused them hardship.

Gasoline rose 30 percent in the U.S. this year to a record $3.962 a gallon on May 29, according to AAA, the nation's biggest motoring club. In Germany, a gallon costs $8.33, more than double 2002 levels. The highest is $9.69 in Norway, where taxes are designed to curb consumption in the world's third-biggest exporter of crude oil, data compiled by Bloomberg show.

U.S. prices, which topped the 1981 inflation-adjusted high last month, led Merrill Lynch & Co. chief North America economist David Rosenberg to warn that the economy will expand 0.6 percent this year, half his previous forecast, and may contract 0.3 percent in 2009. Europeans already adapted to higher fuel costs. German unemployment fell every month but one since January 2006, even as gasoline rose 42 percent.

A Permanent Consumption change - not transitory, in the lingo of Milton Friedman's PIH hypothesis:

"Individuals have often believed that increases in gasoline prices might be temporary, and indeed that was often the case,'' said Lynn Reaser, chief economist at Bank of America Corp.'s investment strategy group in Boston. "In the current environment most Americans believe that $4 gasoline will be a permanent feature of the landscape.''