I have been wondering what really goes into the price of a gallon of gas so I decided to do some research. Interestingly enough there was not a clear answer available. From combing several sources I came up with the following numbers as rounded averages based on several sources at current market rates:
Taxes: $0.50
Refining: $0.80
Extraction and Shipping: $0.40
Operating Costs: $0.15
Middlemen: $0.15
Royalties: $0.70
Which leaves about $1.40 for the oil company. Now they pay some taxes on that and they spend some on exploration and development of new oil wells and they spend some on alternative energy sources and they spend a bit on lobbying and of course they make a lot of profit. Here are some interesting facts I learned about a gallon of gas:
1) The taxes on a gallon of gas are mostly fixed and do not vary with the price of gas. So while for many things in NY there is an 8% or so sales tax, but not on gas.
2) While there are 42 gallons in a barrel of oil, it makes less than 30 gallons of gas. Even at 42 gallons, the price per gallon of oil would be $2.62. But the cost of the oil in a gallon of gas works out to less than $2 because of how the oil is refined. Some of that oil makes diesel and fuel oil which cost more than gas, and some of it makes the petroleum for plastic which costs more than diesel or fuel oil, and so on.
3) The lagging US dollar has caused the price of oil to go up about $40 a barrel. While some blame the price increase on production, delivery, and refining problems, those are not really the culprits. High demand is an issue, but in the end we can blame the high costs on the degrading economy in the U.S. which I blame on Bush and the rest of the Republicans.
