Recently the barrel of crude oil has reached all time highs. As of 3/14/2008, the price of a barrel of crude oil is $110.21 (one of the highest cost of oil in history). Not many people understand the break down and the cost to produce gasoline from crude oil, but it’s fairly simple.
When your local news channel reports the cost of crude oil per barrel, all you need to do is divide that dollar amount by 42, and you will have the price per gallon. As of today, the cost of crude oil is ~$110, so $110/42 is ~$2.62 per gallon. After taking into account the applicable taxes and costs to get the gasoline to your local gas station, you will see that final value at the pump.
Unlike most middle men, it is the producers of crude oil that benefits from this type of cost rally that we have seen in the past few weeks. The cost to produce gasoline is composed of four major points:
- Cost of Crude Oil,~$2.62
- Refining Cost, ~$0.24
- Taxes, ~$0.33
- Cost to Ship and Sell, ~$0.40
You will be paying: $3.59 for regular unleaded.
The cost of refining the crude oil (to make it usable for automobile consumption), taxes, and the cost to ship and sell are all relatively normal costs of supplying gas to the general public. However, it is the cost of oil that keeps fluctuating and changing as our economy changes and our supply of crude oil changes.
How will people cope with the surge of gasoline prices? Well, we could use that $600 “economic stimulus” the government promised us, or we can find better means of doing our daily activites and try to control our consumption of gasoline.
If you enjoyed this post, Subscribe to my Free Newsletter!
{ 0 comments… add one now }