The Price of Gasoline
June 1, 2005
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 gasoli ...