The Breakdown Of Gas Prices

The price of gasoline will continue to increase this summer, and I dare you to find me one person in this country who is happy about it. People who live in the wilderness and don't interact with society? Gas thieves? Gas cap lock manufacturers? Ok, maybe them.

You might think that gas station owners and big oil companies are loving these record high prices. But you would be wrong. We've all heard that these high gas prices are conversely affected by the sale of gasoline, because it is lowering the demand for the fuel in the market. The less people who can afford the high prices, the less that is sold.

FiveCentNickel, an interesting money blog, took a look at the Department of Energy's most recent fuel update numbers and did some crunching.

Here is the latest breakdown of what goes into the price of gas:

73% - Crude oil
11% - Federal and state taxes
10% - Refining costs and profits
6% - Distribution and marketing

For some of you, this might be obvious, but it's still an interesting breakdown to examine. The big number that gets your attention is the price of crude oil. In spite of today's announcement that Saudi Arabia will be increasing oil production, prices continue to hover around the $135 - $140 mark.

But in further detail, take a look at that 6% distribution and marketing. That percentage includes the cost of what it takes to get the gas to market plus the gas station's profits.

So as you can see your local Shell and BP aren't really the well-endowed bandits you might think they are. With the cost of trucking and shipping the gasoline to stations rising because of high gas prices (being the fixed proportional numbers they are), the gas companies are biting a similar bullet.

My solution? Well if drilling in Alaska and off the coast of Florida are frowned upon by all those environmental conservatives (polar bears like Coca-Cola, but they don't like oil?), why not get some drills and roughnecks up to the Moon. How much you wanna bet there is more oil floating in the middle of the moon (next to all the dinosaur bones) than in Saudi Arabia?

FiveCentNickel: What Goes Into Gas Prices, June 13, 2008

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200 Economists Say 'Gas-Tax Holiday' Sucks

When economists believe in something this strongly, their posse rolls deep.

The Gas-Tax Holiday, proposed by John McCain, was an attempt to make one super-wealthy candidate seem like a guy concerned about the average citizens' problems. Instead, it's getting blasted as the worst idea imaginable.

Both Hillary Clinton and John McCain agree in unison that something needs to be done to help out the little guy. Maybe a lifting of the gas-tax will drop prices enough so that people could enjoy a little cruise to start their summer? And maybe, in doing that, those people will repay that brave politician by voting for them in fall. Not a terrible idea in theory...wait, apparently yes it was. Bloomberg reports that:

The moratorium would mostly benefit oil companies while increasing the federal budget deficit and reducing funding for the government highway maintenance trust fund, the economists said.

Over 200 economists from around the country, including 4 Nobel prize winners, have signed and circulated a petition rejecting the gas-tax holiday proposals. And they are being pretty vocal about it. Alice Rivlin, herself a Clinton supporter, continued by saying that if anything, we should raise the gas-tax to perhaps curb gasoline usage entirely.

Now that doesn't really sound like a good idea either. If the only solution to high gas prices is to use less gas, do you think anyone would go along with it?

But none of that matters to Hillary. She doesn't want to hear about all these economists spending too much time thinking and not enough time caring for the middle-class.

Clinton yesterday dismissed economists' objections to the plan.

``I'm not going to put my lot in with economists,'' she said in an interview on ABC's This Week with George Stephanopoulos. ``We would design it in such a way that it would be implemented effectively.''

Basically Clinton doesn't care that the very theory of temporarily suspending gas-taxes doesn't work, that's hogwash. She's going to implement it so it does work. Is that too hard to understand, egghead economists?

That having been said, can we really trust a group of 200 economists that hang out together? Do they really get out much. I'm imagining a bunch of nerds drinking tea and riding these around campus:




Bloomberg: Economists Criticize Clinton, McCain Gas-Tax Plans. May 5, 2008

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