Gasoline Price At The Pump
Factors That Determine Gasoline Prices
Even though most people think that the prices of crude oil establish the cost of gasoline, there are several other factors involved that decide what you will pay at your local gasoline station. If you track the gas prices you will find that compared to the other months in a year, summer months with have usually have higher prices. This is due in part to a lower supply and also a higher demand. There are other external factors such as wars and natural disasters (like Hurricane Ike this past week) which are responsible for the fluctuating gasoline prices.
The money that you pay at the gas station is inclusive of taxes, marketing and distribution costs, refining costs and the crude oil prices. According to US Department of Energy, each dollar that you spend on gas is broken down like so:
Crude oil: $.73 cents
Refining: $.10 cents
Distribution/Marketing/Profits: $.06 cents
Taxes: $.11 cents
Crude Oil:
According to the media, the most significant component that affects the gas prices is the cost of crude oil. OPEC determines the price per barrel depending on the production and the demand for the product. Gasoline prices are volatile and get affected by market conditions, political conflicts and disruption in supplies.
In the last few months, we have seen oil prices spiral out of control with. This number peaked in July as $147.27 dollars per barrel. Today the prices have stabilized a little bit more and are currently around $100 dollars per barrel. It is also important to note that China and India are increasing the global demand for gasoline by a lot. This is due in large part to their fast growing economies and increasing middle class.
Refining Costs:
Crude oil in its natural state is not a usable petroleum product. It has to be brought to refineries where it is then created into products such as diesel fuel and gasoline. A limited number of refineries are available in the United States, so when a hurricane hits (like we saw in Katrina) and wipes out one, this drops the nationwide capacity. Another problem is that no knew refineries have been built in the United States for years, mostly due to the pollution caused by them. In a large sense, it is an issue of refining capacity because this is the limiting factor in gasoline production.
Distribution/Marketing/Profit:
The cost of transporting fuel from the refineries to the retail gasoline stations is significantly high because most refineries are located far away from their distribution points. These costs along with brand marketing costs are passed onto the customer. Retailers typically add 5%-10% for profit margins to these costs to determine the final price of the gas that you pay at the gas stations.
Taxes:
Tax on gasoline is quite high. Federal Excise Taxes come to $.184 cents per gallon and State Excise Taxes typically range from $.096 cents to $.0175 cents per gallon depending on where you live. Other taxes include an oil inspection fee, storage tank fees, and sales tax bringing the total tax amount to around 52 cents per gallon.
It is important to note that there are several other factors that affect the prices consumers pay at the pump, besides the ones mentioned above. Additives such as ethanol are typically more expensive than conventional gasoline. All these components combined together determine the price of gasoline in United States.
Small Missouri Town Energy Independent
Its time to bring out the champagne folks. Rock Port Missouri has made the public proud by becoming the first town in America to generate all of it’s electrical requirements from wind power. The small town of 1400 in Northwestern Missouri accomplished this feat by constructing four wind turbines, each with the capability of delivering over one megawatt of power.
Currently the electrical demand for the town of Rock Port is 13 million kilowatt hours a year. At full capacity, the wind turbines will produce an estimated 16 million kilowatt hours of electricity a year. This equates to a surplus of nearly 3 million kilowatt hours of electricity, which under an agreement will be sold to utility companies.
How I look at it, the wind farm is a win-win situation for all. Not only does it produce clean and renewable energy, but it also aids the local economy. The wind farm provides additional income to local farmers who have leased portions of their land to the project. There is also an increased tax base for the town. In addition to these things, the wind farm is proving to the rest of the United States that regardless of size, wind farms have the potential to power a good portion of our country. If one town can become fully powered by wind, then so can others.
Renewable Energy Groups Latest Addition
Renewable Energy Group began production of biodiesel in it’s brand new Seabrook Texas plant yesterday. The plant which is located outside of Houston, is expected to be able to produce an estimated thirty-five million gallons of biodiesel in its first year of operation. Most of this biofuel will come from sources such as canola oil, soybean oil, and animal fat. Another interesting aspect is that the company announced plans that it expects to switch over and create biodiesel from algae, in the distant future.
The Seabrook plant is just one of nearly ten biodiesel plants owned or operated by Renewable Energy Group. With the addition of this new plant, Renewable Energy Group has the capability of creating over three-hundred million gallons of biodiesel a year. To put this number into perspective, this is about half of all the biodiesel produced domestically in the United States each year.
