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The Price of Gasoline

By Edited Aug 13, 2016 0 0

gas pump

The price of gas per gallon before the 1950's ranged from 0.17 cents to 0.27 cents.   Today it has reached up to and over $4 a gallon in many places.  We are paying an estimated 0.32 cents per gallon higher than we were a year ago.  Inflation plays a key role in rising gas costs, but is not the only factor increasing the price at the pump. 

Some people believe the cost of gas is based strictly on the price of crude oil.  However, this is not the case.  According to the United States Department of Energy website, what we pay is broken down as follows:  Crude oil 72%, refining 12%, taxes 11%, and distribution and marketing at 5%.

Crude oil companies get the largest chunk of your money when you fill up.  This is determined by OPEC, (Organization of the Petroleum Exporting Countries).  Increased demand causes the price of crude oil to go up, even if there is plenty available.  OPEC is made up of thirteen countries including Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.  OPEC owns the majority of oil reserves and make up about 40% of the world's production.  The United States and Canada also owns many oil reserves.

Refining is converting crude oil to gasoline.  It varies in color and texture.  Light oil is quicker and cheaper to convert to gasoline.  Darker oil takes more time to refine and is more expensive.

Excise taxes are placed on gasoline by the state and federal government.  Other taxes include state sales tax, underground storage fees, or environmental charges.  Taxes are the cause for such differences in price between the states.

Some of the money is also due to stations marking up the price.  Normally only a few cents per gallon is added to the cost, but can vary to as much as ten cents per gallon.  Certain states have laws against price variation so that smaller owned stations can still compete with larger companies.

Transportation also affects price.  If the gasoline is going to be transported somewhere close by the refinery, then it will cost less.  If it is being hauled across the country or to another country, you can expect the price to jump due to higher transportation costs.

Many are warning that gas will rise to $5 per gallon by summer of 2012.  The downfall to rising gas costs is that in turn, the cost of everything else will rise along with it.  Food supply is affected because farmers need fuel for tractors, or to transport food.  And if it costs more to transport something, the extra cost will trickle down the line to the consumer.  It also affects consumer's vacations, because most people do not want to take a road trip and be stuck with a hefty gas bill.  And choosing to fly instead isn't much better.  Planes use fuel too, so ticket prices start climbing as well.  It's hard on businesses who use a lot of fuel to stay afloat without upping their prices.  It also makes it more difficult for those who drive to work, because wages are not usually increased enough to keep up with inflation.

A large majority of Americans blame the president for not doing anything to stop rising costs.  This is something that has always happened in the past, even though the president, whether republican or democrat actually has little control over gas prices.  Others blame the greed of oil companies.  Some believe it's due to the threat of war against Iran.  People also think it's because of the value of our declining dollar, and talks of it no longer being used as the currency for oil trade.  Oil traders do control price in some ways.  Price is affected by supply and demand, with it typically being higher in warm weather and lower during cool weather.  The United States uses about 1/4 of the world's oil.  Some believe rising costs will halt the growth of the economy.  It is definitely playing out as a large factor in this years presidential race, with each side pointing the finger at the other.  Others believe it is because we need to drill more in the United States, but along with taxes and costs to refine and transport we would still be looking at probably the same amount per gallon if not more.

Unless you live in a large city there is usually not an option of taking a bus to work.   A few ways to deal with rising costs is to carpool, conserve gas by making any needed stops on the way to or from work, or cut down on other spending to make up the difference.  Inflating your tires to the appropriate level will help your vehicle get better gas mileage.  Other ways to improve gas mileage is by using your air conditioner less, lightening your load by removing unnecessary items in your vehicle, driving slower, keeping windows rolled up, using correct oil and changing air filters when needed, and keeping the lights off.  If you can use regular grade in your car do it.  There's no need in spending the extra money for premium if its something you dont have to have.

I remember when I first started driving, and gas was around .70 cents a gallon.  It sure would be nice to see those days again.  I'd be happy even paying $2!  With no pay increase it really hurts to fill up a larger SUV at $100 a pop.  And I am lucky if that lasts for an entire week.  While buying a smaller car that is cheaper on gas would be ideal, we all don't have the means of using that as an option.  So what can you do?  It's a catch 20 because it's something we all use that the majority of us have to have, and they know it.  We tough it out the best we can and hope for the day that prices start to fall again. 

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Bibliography

  1. "rising gas prices." reuters. 28/03/2012 <Web >
  2. "high gas prices." US economy. 28/03/2012 <Web >
  3. "gasoline." department of energy. 28/03/2012 <Web >

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