Gas Where Does The Money Go


Gas Where Does The Money Go 1

With extremely high gas prices straining consumers’ pockets in​ recent months,​ it​ is​ only natural for people to​ wonder where all the​ money they pay at​ the​ pump goes. Contrary to​ popular belief,​ the​ price of​ gas is​ not solely reliant on​ the​ price of​ crude oil. There are many parties involved in​ setting the​ price of​ the​ gas you purchase at​ the​ pump,​ and below is​ a​ quick run-through on​ who they are and what portion of​ the​ entire price they require.

- Crude oil: Crude oil suppliers require the​ largest share of​ the​ pie at​ about 45%. This share is​ determined by the​ oil-exporting nations and the​ Organization of​ the​ Petroleum Exporting Countries (OPEC) in​ particular. the​ price of​ one barrel of​ crude oil depends on​ how much crude oil these oil-exporting countries produce. Sometimes gas prices rise despite the​ fact that there is​ enough crude oil to​ go around,​ and this is​ because of​ a​ variety of​ other factors,​ one of​ which is​ the​ quality of​ oil. Oil can be heavy or​ light,​ and sweet or​ sour. These words only describe the​ quality,​ not the​ taste,​ of​ oil. For example,​ light,​ sweet crude oil is​ cheaper and easier to​ refine,​ but quantities of​ this kind of​ oil have been running lower recently. However,​ there is​ still a​ lot of​ heavy,​ sour oil,​ which means that refineries must spend more money refining it.

- Taxes: Federal and local taxes take about 31% of​ the​ price you pay at​ the​ pump. Federal excise taxes account for about 18 cents per gallon,​ while state excise taxes require about 20 cents per gallon. There might also be some additional state sales taxes,​ along with local and city taxes.

- Refining costs: Refining crude oil makes up approximately 13% of​ the​ price you pay at​ the​ gas pump.

- Distribution and marketing: the​ costs of​ transporting and marketing gas make up about 13% of​ the​ price of​ gas. Crude oil must be transported from oil-producing countries to​ refineries,​ then the​ gasoline must be transported to​ distribution points,​ and then lastly to​ the​ gas stations that fill your tank. All of​ the​ costs of​ this shipping and transportation are transferred to​ you,​ the​ end consumer. Along with all this comes the​ marketing that is​ involved in​ increasing a​ brand’s awareness and appeal,​ and these costs are also passed on​ to​ the​ consumer.

- Gas station markups: There is​ no set percentage for this number. Gas stations are at​ their own discretion as​ to​ how much to​ add on​ to​ the​ price in​ order to​ actually make a​ profit on​ the​ gas that they sell. Some stations (usually the​ larger ones) will only tack on​ a​ couple cents,​ while others will add a​ dime or​ even more. Some states have laws that prevent stations from adding on​ less than a​ specified percentage over the​ price that the​ wholesaler sets. These markups are also dependent on​ the​ area where the​ station is​ located. Demographic information such as​ median income and population affect the​ decisions that stations make concerning the​ exact price they set for the​ gasoline that they sell from their pumps.



Gas Where Does The Money Go



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