When you pull your SUV in the local Shell station and spend $100 filling up your tank, have you ever wondered "Just where does that money go?"
You've seen those news reports every spring, in which the reporter blames rising prices at the fuel pump on "Asian demand, California refinery regulations or speculation on Brent crude oil."
Speculation and demand spikes may be factors but as with any consumer product, many different variants actually determine what you pay at the pump. Petroleum is a highly regulated and taxed commodity, and that means federal and state governments take in a percentage of every dollar spent on gas by means of surcharges.
According to the U.S. Department of Energy, the average price of gas across the United States this week was $3.82 a gallon. The DOE provides a breakdown based on current prices:
Raw Materials
Crude oil cost is estimated at 80 percent of the current price, so about $3.05 of the price goes back to raw material used to produce gasoline. Crude oil prices are set by global commodity markets in places such as London and New York.
Refining
According to the DOE, refining costs come in at about 11 percent. At current prices, that comes to about 40 cents per gallon to cover wages, equipment and financing costs.
Distribution Costs
Refiners take petroleum from manufacturing centers to the retail service stations that in most cases are owned by a third party, despite whatever the brand name is on the sign out front.
The local retailer sets the price based on competition and price brackets set by the refiner. It's estimated that regardless of the price of gas, the local service station only makes between five to ten cents a gallon. This explains why most service stations are in fact convenience stores with gas pumps attached.
Taxes
Taxes are a set amount on each gallon regardless of fluctuating costs. So how much does the government take on a gallon of gas? As of 2012, the national average is 48.9 cents a gallon. State tax amounts vary with California taxing 49 cents on every gallon while Alaska only extracts eight cents on a gallon.
