Jun 27 2010

Why does gas cost so much?

Category: Energy & Fuel

Answer:

Several factors go into determining the price of a gallon of gasoline. Typically, the formula is rather elementary and it comes down to supply and demand. Crude Oil + Refining Process + Retail Sales/Distribution + Taxes = Gas Price. However, these elements are not represented in equal proportion. Below are the segments.

Crude oil

  • Finding the crude oil
  • Recovering the crude oil from the ground
  • The Transportation of the crude oil to the refinery
  • Maintaining a reserve of crude oil
  • R&D of new drilling techniques and equipment
  • Researching new places to drill
  • Wholesaler Profits

Refining Process

  • Blending the gasoline to government standards
  • Transporting the gasoline to fuel pumps around the country
  • Profits for refining and transporting

Retail Sales & Distribution

  • Operational costs
  • Marketing costs
  • Profit from sales and distribution

Taxes

  • Federal Taxes
  • State Taxes

Other topics that may effect oil prices



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