Gasoline is made by processing or refining crude oil.� The cost of gasoline is shown in the following table:��
Cost Component
Dollars per Barrel
Cents per Gallon
Percent of Pump Price
Crude Oil Price
$ 90.00
214.3
70%
Transportation to Refinery
$ 2.00
4.8
2%
Refining Costs
$ 4.00
9.5
3%
Refining Margins
$ 5.00
11.9
4%
Transportation to Market
$ 2.75
6.5
2%
Marketing Costs
$ 2.25
5.4
2%
Marketing Margins
$ 5.00
11.9
4%
State and Federal Taxes*
$ 18.27
43.5
14%
Pump Price including Taxes
$129.27
307.8
100%
* National Average and late October 2007 prices
The two largest cost components are crude oil and taxes which comprise about 84% of gasoline price.� In the United States taxes include both a Federal and State tax.� Both of these taxes are levied as cents/gallon rather than as a percent of price.� State taxes can vary considerably depending on the need and philosophy of the local government. The price of crude oil, which is 58% of pump price in our example, is a large factor in determining pump prices and in causing prices to fluctuate.� This relationship is illustrated in the plot of Gasoline and Crude Oil Prices.�
Please check the following sites for other viewpoints on gasoline prices:
PetroStrategies analysis indicates that increases in average U.S. pump prices are explained by the average cost of crude oil processed in a U.S. refinery (Refiner's Acquisition Cost) and the average utilization of U.S. refining capacity.�
The formula used to make this forecast is based on historical data and has an R2 value of 0.9182.