7/3/2012 7:12 PM ET|
What makes up the cost of gas?
Prices have been especially volatile this year, and it's fair to wonder exactly which factors determine how much you pay at the pump.
Gas prices got your attention? You're probably asking where all the money you're shelling out at the pump is going.
There are a couple of ways to answer that.
Industry shows how gas price breaks down
The American Petroleum Institute says it takes one gallon of oil to make a gallon of gasoline. The price of oil is determined in commodity markets, where companies and traders buy and sell petroleum for purposes that can include refining it into gasoline and holding it as an investment. The markets, and the prices they set, are influenced by supply-and-demand factors, such as trouble in the Middle East that could result in less oil coming from that region of the world.
After oil prices, the rest of the price of a gallon of gas comes from taxes (14%) and costs associated with refining, moving and selling the gasoline (15%), according to the API.
At the time of the API's most recent study, in late February, the national average price of regular-grade gasoline was $3.58 per gallon. By the group's estimates and percentages, about $2.54 of that price covered crude oil costs, 50 cents went to taxes, and about 54 cents went into refining, moving and retailing.
Get geeky for more exact gas cost analysis
If you want to get geekier about where your gas money is going, you can do a more exact and up-to-date calculation on your own. Here's how:
- Find the price of a gallon of gas. Go online to AAA's Daily Fuel Gauge Report. For example, as of June 29, the auto club showed that a gallon of regular gasoline sold for about $3.35.
- Find the price of a gallon of oil. Head to Bloomberg.com's Energy & Oil Prices page. As of June 29, it showed a barrel of oil selling for about $83.99. There are 42 gallons in a barrel of oil, so divide $83.99 by 42 to get $1.99 as the price of one gallon of oil. Again, a gallon of oil can be refined into one gallon of gasoline, according to API. So, about $1.99 of the June 29 price for a gallon of gas went toward the cost of the underlying oil. That works out to about 65% of what you paid at the pump.
- Find the cost of taxes. The federal tax on gasoline is 18.4 cents per gallon. On top of that, there are state taxes and, depending on where you live, local gasoline and/or sales taxes, too. If taxes are typical where you are, the API estimates, you're paying 49 cents per gallon in federal, state and local gas taxes, making up 14.6% of the average $3.35 gas price.
- Determine the cost of refining, transportation and retailing. The rest of the cost of gasoline goes to turning crude oil into fuel, moving it to gas stations and retail markup. Get this number by subtracting the amounts in steps 2 and 3 from the average price in step 1. In this case, that's $3.35 minus $1.99 and minus 49 cents, which comes out to 87 cents for refining, transportation and retailing -- or about 26%.
And that's how you do the math. Keep in mind that taxes and other factors that make up gas prices can differ by region, state, metro area and city. Check out Bankrate's map of gasoline taxes by state to see how much of your gas money is going to federal and state taxes.
If you want more details about your own local taxes, contact your city, county, and/or state department of revenue, department of finances or the equivalent.
More from Bankrate.com:
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Ok! Folks you can't get a gallon of gas out of a gallon of crude once it's refined there are several byproducts that come out of it that make-up plastics, asphalt, etc. the list goes on, I think API needs to get it rethought.
It makes no diffrent what Party you are assosiated with their all in bed together and the oil cos are on top.
This is all BS and Fabrication to attempt and justify why the consumers are being riped off.
Majority of the "Raw Crude" cost is due to Greed and Speculation.. The Entire Article is crap.
On the Global Market a select few large organizations and holding companies manipulate the prices of commodities such as Oil Crude & Refined. These have made major profits at the expense of US Consumers. WHY.?? Corruption and Greed.. Do you think Obama-Nation got into office by himself.. Hell No - Hes owned by the Rich & Powerful -- the Chicago Mercantile Exchange...
First of all, the entire article started with a fallacy ... that is, one gallon of crude does NOT make one gallon of gas. It can't when you apply any ammount of common sense. Think about it, out of that one gallon of crude you have to refine and filter and remove the impurities, so that what you end up with is only the remaining gasoline. There HAS to be less than one gallon of gas just for that. Also, when I was young they talked about gasoline waste called 'dirty gas' now known as Diesel Fuel. That was a bi-product of gasoline refining. Still is. The profits from gasoline refining pay for the gasoline and the rest was extra that is used for additional profits at no real cost.
Now, if you want to believe the hype that they are trying to sell you in the article, go for it, that is your choice, but lets do a comparison, shall we, lets take one gallon of pure corn oil, and see if that will make one gallon of ethanol. After processing and refining and distilling, you tell me if you still have a gallon left over.
Have a nice day people ...........
This article doesn't dig deep enough. All the accounting is based on the price of crude oil at $83 a barrel and goes from there.,
The question should start with "how much of that $83 is actual cost"? And then go into "how much is driven by speculators"?
And as for "supply and demand", it's really demand and supply. The oil companies know full well what the demand is, and produce 99% of it so they can CREATE shortages. Read a little history. The first thing the oil companies did when Reagan deregulated their industry in the early 80's, was to SHUT DOWN about 30% of their refining capacity so they could create less supply and drive up the prices.
All of this is a bunch of BS!
So much was left out of this article. So much truth, that is.
Leave the propaganda on the newsroom floor, Tools. No one is buying it.
What a bunch of propoganda this is... What the API fails to mention is the 137 Billion that was added to our deficient as a subsidy for the industry. Add that to your calculations and you realize we pay as much as they do in Britan or any other nation. Except in those countries you see the price directly, in America it gets added to our deficiet so we can loose social security and other vital goverment services. Nice try API, but we are not that blind.
No more oil subsidies!
Robert Wykes.......Great post! Well said.
Yes, corruption rules the day in Washington. They question is when will the next revolution start in this country if Washington, the corrupt Congress, corporations continue to buy elections, politicians?
They feed us so much b.s. you can cut it with a knife!
Now the war machine run by The Industrial Military Complex is doing saber rattling near Iran. If war breaks out there, get ready for more profiteering by big oil as gas prices will spike through the roof.
We are not done with one conflict and they want to start another one. The warmongers in Congress keep the war machine chugging along.
1 gallon of oil to make 1 gallon of gas, the very first of this article is false so how can anything else be correct
if it takes 1 gal of oil to make 1 gallon of gas then that leaves absolutely no loss for processing i venture that this is impossibly efficient
A bunch of b.s. to make the oil companies look good and not appear to gouge us. Did they factor in that the greedy oil companies export the bulk of their oil overseas so they can control supply in this country and thus raise prices accordlingly?
The bottom line is overseas events should not influence what we pay for gas in this country. We do not get the bulk of oil from the middle east as the oil companies would like us to believe.
Congress deregulated the speculators creating the perfect storm.
Just more propaganda from the greedy oil companies who's time has come to be regulated by the corrupt Congress. That will be an uphill battle since many GOP congressmen receive fat checks from big oil in the form of political contributions for their reelection efforts.
I'm sure the fact that gasoline is current our largest EXPORT item has nothing to do with it or those futures speculators also have nothing to do with it. If you bought any of the dreck in this article... go to the back of the class.
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