The Price of Gasoline at the Pump

There are actually many factors that determine what you end up paying at the pump. You might think it is dependent on the price of crude oil. The money you pay at the pump gets broken down into little pieces that get distributed among several entities. Just like any other consumer product, gasoline’s supply chain determines what the price will be. Several groups have to get paid for their contribution.

The biggest portion of the cost of gas is crude oil, presently that is about 50 percent. This is determined by the world's oil-exporting nations, particularly the Organization of the Petroleum Exporting Countries (OPEC). The price of a barrel of oil is determined by how much these countries are producing.

Prices of crude oil fluctuate upwards in a time of emergency or after a disaster when they have been known to double. Even when there is plenty of crude oil on the market, sometimes gas prices can go up. Because it depends on what kind is plentiful: the light or sometimes labeled “sweet” oil or the heavy (“sour”) type. Light crude is easier and cheaper to refine. There is a lot of heavy crude available in the world, but refineries have to undergo costly retooling to handle it.

The next portion (28%) of the cost of gasoline has to do with the refining of crude oil. This cost is determined by how much is distilled from the crude oil batch and the refining process costs involved.

Crude oil is transported to refineries and gasoline is shipped from the refineries to distribution points and then to gas stations. The price of this transportation is included in the gasoline price at the pump. The advertising costs of the certain brand is also passed along to the consumer. The distribution and marketing together account for 8% of the price of gasoline.

In the United States, 14% of the total price of gas is for taxes (federal and local). Federal excise taxes are 18.4 cents per gallon, and state excise taxes average 18.2 cents per gallon. There may also be some additional taxes such as applicable state sales taxes, gross receipts taxes, underground storage tank fees, and environmental fees. Taxes vary from state to state making the price of gas vary too.

Some of the actual money you spend at the pump does go to the service station which usually adds a couple of cents per gallon. There's no set standard; so shopping around may be a worthwhile option. Some states have markup laws designed to protect small, individually-owned gas stations from being driven out of business by large chains.

Other variables can affect the price of gasoline. Competition between local gas stations can drive prices down. Distance from the oil refineries due to transportation costs involved can change the price. Anything that affects any part of the process, from when the oil is drilled, through refining and distribution will result in a price change. World events, wars and weather disasters can also raise prices. And, as in just recently, legislation in Washington DC can also affect the price. All of these factors must be studied and watched by the oil companies like Triple Diamond Energy Corporation to help them predict the future of their products in the constantly changing marketplace.