What am I paying for in the price of a gallon of gasoline?

I’m asked this question a lot. And I know a lot of drivers ask themselves this question when they pull up to the pump.

The answer is based on the economics of supply and demand and how products are manufactured and sold – along with what the government takes in taxes. Let’s take a look, based on the U.S. Energy Information Administration’s breakdown of the estimated average price of a gallon of gas in December 2011, which was $3.27.

That's what I said..9/10ths add the 1/10 equals to the next whole number [obviously higher]..am I missing something Correct me to see.

Then the price goes up at the next higher 3.45 9/10 becomes 3.46 which jumps again to 3.46 9/10 and so on. But then you get into the formula estimated of cost of the # gals that make up one barrel of oil, the # of barrels, per month, per year, revenues, estimates etc in the present year.

A few years ago, I think it was 2006 or 2007, I read a report on the rise in the average annual cost of a four year college education, from 1978 to 2006/7.

I backed the dollar amount of the increase into an “inflation rate” for college tutition for the period covered by the report.

I went and found the national average retail price for gasoline, as of 1978, and applied the “inflation rate” for college tutition to it.

The result was what a gallon of gas would be costing at the pump if that cost grew as much as did college tuition from 1978 to 2006/7.

The answer was $12.93 a gallon.

Yet, due to the Liberal/Progressive/Marxist hold on the educational industrial establishment, and the political class’s partnership with it, the oil industry is evil and all we need to do about education is spend more money on it.

So, EXXON makes 7cents /Gal of Gas. & US Govt makes 39cents/Gal....but their convoluted explanation of the ( “-7 “)will never be understood and EXxon will still be blamed.

tip to “big oil”, simplify your explanations - get rid of the “-7” on your graphs.

Reading can be fun as well as informative, as evidenced by the following quotation from the article:

"As the EIA figures show, however, refining doesn’t always produce a profit. In December, the data indicate that the U.S. market price for gasoline coming out of refineries was on average about 7 cents per gallon (-2 percent) below the refiners’ cost of crude oil alone, and before accounting for their costs of upgrading the crude into gasoline. In other words, refineries faced a market where domestic gasoline prices were very weak relative to global crude prices."

This is written about as straightforwardly as one might need to grasp the concept. They're saying that in December, 2011, at a time of relatively high crude prices, retail gasoline demand was weak, which limited the pricing power of refiners. Instead of the refining process adding value to the product, it was adding costs they could not recover from the retailers. At that time, it was costing them an average of 7 cents per gallon to refine crude oil into gasoline. The refiners were eating that increment of cost, not the retail customers. Hence, the cost associated with refining the gasoline, at least for the period they're talking about, was not being passed along to the consumer. But there are always costs associated with refining (wages, utilities, equipment, etc.), and those costs were paid by the refiner instead of being passed along as they would be normally.

That is why the graphic shows that the cost to you for refining crude into gasoline is shown as a negative. They paid the cost during the specified period, not you, the customer.

Gasoline refining hasn't been a very good business for the last few years. The good money has been found upstream (exploration/production) instead of downstream (refining/marketing.)

XOM's overall point is that for December, 2011, they paid 7 cents a gallon for you to have gasoline by eating the cost of refining. As opposed to the state and federal governments, which collect 39 cents per gallon for adding ZERO value to the process.

President Clinton's two terms average weekly gasoline prices ranged from a low of $0.88 per gallon to $1.66. Then down lower to $1.04 [ low follows election year]

"Wartime" President George W. Bush, prices ranged from a low of $1.04 to $4.05 per gallon then down to the low of 1.79 when Obama took office.[election year]

Obama $1.79 - highest USA Average so far was $3.96 [reg] but some states felt the hurt even more than "the reported average"

Does this mean gas prices will drop following the same path of other decreases before elections come around ;)

NewsBusters had a great article: Media Pump Up Obama, Despite High Gas Prices

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