The Price of Gasoline

The Price of Gasoline

What you are paying for when you buy a gallon of gasoline? Most people complain about the high cost of gasoline, but few understand how the price is calculated. Many people think this cost is for gasoline only, but many other factors determine what you pay at the pumps.

Gasoline is a mixture of the lighter liquid hydrocarbons, and used chiefly as a fuel for internal-combustion engines “Microsoft Encarta,” 2005). Crude oil accounts for nearly 17 percent of the energy consumed in the United States. Gasoline is one of the main products developed from crude oil in the United States. The primary use for gasoline is in automobiles and light trucks. Fuel produced all year round, and is delivered from oil refineries through pipelines to a massive distribution chain serving 167,000 retail stations throughout the United States (“EIA Brochures”, 2004).

The prices paid by consumers at the pump reflect the cost to produce and deliver gasoline to consumers. Included is the cost of crude oil to refiners, refinery- processing costs, marketing and distribution costs, and finally the retail station costs and taxes. Approximately 27 percent of the cost of a gallon of gasoline is federal, state, and local taxes. Another 14 percent is a combination of distribution, marketing, and retail dealer costs and profits. Refining costs and profits account for about 15 percent of the retail price of gasoline. This part varies from region to region due to the different formulations required in different parts of the country (“EIA Brochures”, 2004) .

The average retail price for gasoline tends to be higher in certain States or regions than in others. According to the Energy Information Administration (EIA), other factors contribute to regional and local differences in gasoline prices aside from taxes. Special gasolines are required in some areas of the country. Environmental programs, aimed at reducing carbon monoxide, smog, and air toxins, require oxygenated reformulated, and low-volatility (evaporates more slowly) gasoline, which comes at a much higher price (“EIA Brochures”, 2004).

The proximity of refineries to crude oil supplies can be a factor, as well as shipping costs from the refinery to market. In addition, the areas farthest from the Gulf Coast are the source of nearly half of the gasoline produced in the United States, and th...

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...ors that go into that price. Whether it’s the taxes charged by federal state, and/or local government, the amount of competition in the region, the region’s proximity to a reliable gasoline supply or even emissions regulations. The price of the fuel we buy is carefully calculated and is subject to many variables. Informed consumers should understand these factors, and keep them in mind each time they fill their tanks.

Reference

California Energy Commission, Media and public communications office, (1994-2008), page

updated 03/17/2007 Retrieved 05/19/2007 from http:///www.energy.ca.gov/gasoline_q- and-a.html

Energy Information Administration, (2003) California gasoline price study: preliminary

findings, Retrieved 5/04/2007 from

Http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2003/cagasoline/cagasoline.pdf

Specialized Information Services, A primer on gasoline prices, publication number DOE/EIA-X040, (released June 2007), Retrieved 5/04/2007 from Http://www.eia.doe.gov/neic/brochure/oil_gas/primer/primer.htm

Speir, Robert A, Investigation into the current run-up in gasoline, (2004-2008) Retrieved 5/18/2007 from Http://www.iic-inc.com/curr.shtml