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Gasoline price question?
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If 1 barrel, 42 gallons, of crude yields only 19.5-20 gallons of gasoline, depending on refinery, how is it that gas is only 3$ or so per gallon? I'm sure it cost money to refine, ship, and put in the vehicle and I know there's at least 35-40 Cents a gallon in Federal and State taxes. So 70$/20 is 3.50$ a gallon. Add in profit, taxes, refiner costs etc ect why isn't gas more like 4.50$ a gallon?

What am I missing. Is current 70$ per barrel market a different size barrel, projected value or something else? Is the above 42/20 ratio incorrect?

~Matt
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Re: Gasoline price question? [MJuric] [ In reply to ]
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There are other things in that barrel that are also recovered and sold at a profit beyond the 20 gals of gas:


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Re: Gasoline price question? [peter826] [ In reply to ]
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A Ha, that makes sense. Any idea where one can get a breakdown on cost for these items? Obviously some are worth more than others. I'm just trying to get an idea of how a 70$ barrel gets to 2.85$ a gallon.

~Matt
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Re: Gasoline price question? [MJuric] [ In reply to ]
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I'm just trying to get an idea of how a 70$ barrel gets to 2.85$ a gallon.

Wholesale unleaded gasoline is also a publicly traded commodity. Check out the nymex.com to see what the current contracts are trading at for gas.

http://www.nymex.com/gas_fut_cso.aspx

Are you trying to get a rough estimate of profit margin for a refinery?
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Re: Gasoline price question? [MJuric] [ In reply to ]
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Here's the makeup of the price of a gallon of gas.

Expense Amount per gallon

Production costs 33¢

Producer profit 95¢

Refining costs 40¢

Refining profit 10¢

Transportation costs 12¢

Transportation profit 9¢

Marketing costs 4¢

Marketing profit 4¢

Retailer costs 8¢

Retailer profit 8¢

US Taxes 19¢

State taxes (avg. 23¢) 6¢ to 39¢ details

Local taxes 0 to 20¢

TOTAL $2.65


Makes me wish I owned a few oil wells! Anyways, here's where the info came from.

http://www.gravmag.com/oil.html#dollar

http://abcnews.go.com/...d=1846576&page=1

http://www.eia.doe.gov/...ces/html/petbro.html
Last edited by: Tyrius: May 4, 06 9:43
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Re: Gasoline price question? [Tyrius] [ In reply to ]
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I'm really just trying to "Wrap my head around" the whole process of dinosaur to car fumes.

I hear alot of political BS on price gouging etc etc but I have an gut feeling that there is likely little or none going on. Of course depending on who you are or what your "Bias" is your target is different so I don't really believe much of what I hear in the media.

So far the real price gougers I've found are the "drillers" and good ol' government.

If my numbers are close it costs OPEC around 2-3$ per barrel to get oil out of the ground. I'm assuming a fairly low cost for delivery. So an open market cost of 70$ makes for a HUGE profit margin...WAY HUGE.

Next would be taxes at anywere from 36 to 75+ cents a gallon depending on local. Seems we're getting gouged by government.

Estimates I've heard/seen for price per gallon by refiners is closer to 9-12 cents a gallon. Of course adding in teh idea that refiners are likely also "Drillers", at least in the US, that profit seems misleading.

Again teh above is just my current understanding, certain not correct or even close...but it gives ou an idea of what I'm trying to find out.

~Matt
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Re: Gasoline price question? [Tyrius] [ In reply to ]
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Thanks, that's most of what I was looking for.

~Matt
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Re: Gasoline price question? [Tyrius] [ In reply to ]
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Just looking at these numbers it would seem that although my numbers may be off my targets are pretty close.

Produces make 62C a gallon profit
Taxes account for 25-78C a gallon profit.

Taxes are approximately....well infinite profit margin and producers are at roughly 300% profit margin.

The two big political targets domestic refiners are making a much more realistic 25% profit margin and teh smallest percentage of all on this list equaled only by transportation.

Anyone bringing up investigations into governmental price gouging on this one? Yes that was sarcasm...

~Matt
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Re: Gasoline price question? [MJuric] [ In reply to ]
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If my numbers are close it costs OPEC around 2-3$ per barrel to get oil out of the ground. I'm assuming a fairly low cost for delivery. So an open market cost of 70$ makes for a HUGE profit margin...WAY HUGE.

Which is why OPEC (particularly the Saudi's) want oil prices to be more in the range of 30-40 a barrel. Keeps the consumer sheep (us) from looking to much into alternative methods of oil extraction and more importantly to alternative energy sources (Canadian oil sands, Rocky Mountain oil shale, etc). As the price of oil rises other fuels become cost effective which will lower the demand for oil.
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Re: Gasoline price question? [MJuric] [ In reply to ]
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Produces make 62C a gallon profit

Keep in mind that this is more than likely an average. Saudi Arabia has a much lower production cost than Syncrude (Canadian oil sands). As the price of oil remains high oil exploration companies are going after more expensive oil, which will push this price up and lower their profit some.
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Re: Gasoline price question? [MJuric] [ In reply to ]
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Try building your own road to work/store/grandma's house and you'll see what a good deal you're getting. Sharing that cost makes it not so bad. Anybody who priced out a new driveway knows what I'm talking about.

---------------------------------
Kyle
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Re: Gasoline price question? [KMS] [ In reply to ]
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Question is not whether or not it's better for everyone to pay for but whether we are "Getting gouged". If we could all pay a private company 1/2 the price we are paying the government then we are getting gouged, if not then we aren't.

I'm also paying for roads, bridges etc etc in a plethora of other ways as well, including bonds, tolls, property tax etc etc.

I suspect that we are indeed getting gouged by the government...but then that would not be anything new and likely will never be raised as an issue. However some brave souls have suggested suspending or lower the gas tax.

~Matt
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Re: Gasoline price question? [MJuric] [ In reply to ]
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I suspect that we are indeed getting gouged by the government

The proper term is probably boondoggled, but the point is the same!

Not to hijack your thread anymore, but I've always wondered what happens when a construction company puts in a road that is just absolute crap and has to be completely redone within 5 years or so (as an example see I-88 in the western suburbs of Chicago). Do us stellar tax payers get jobbed and pay for two roads or does the first construction company get stuck with the bill?
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Re: Gasoline price question? [Tyrius] [ In reply to ]
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I have no idea but I'd say it's a 95% probablity that we get stuck with the bill...thus another reason why I'd lean toward another method.

Seems to me that historically we don't get a good "Bang for our buck" whenever government is handing out teh contracts.

I've no idea on how to set up a system that was more "direct" but seems to me in todays day and age there must be some way to set up a way to pay directly or to some other entity that is not easily swayed. In a sense with Tolls we could do this fairly easily. With Illinois I-Pass and other systems it wodul seem that a state wide "tolling" system could eb set up with the revenue for each community going directly to the company responsible for upkeep, new roads etc. removing government from the issue entirely.

Local regions would bid out "Toll price" and the winning bidder gets the job. Obviously alot of isues here but it's an idea.

~Matt
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Re: Gasoline price question? [Tyrius] [ In reply to ]
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Quote:
The proper term is probably boondoggled


I prefer 'mulcted'. ;->


---
"You'll find a slight squeeze on the hooter an excellent safety precaution, Miss Scrumptious."

"I can live with doubt and uncertainty and not knowing. I think it is much more interesting to live not knowing than to have answers that might be wrong." -- Richard Feynman
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