So for the first topic at Mitten Dad, I thought a good topic to get rolling with might be, what exactly makes up the price of gas here in the U.S? As Kiplinger points out, the current rise in gas prices cannot be blamed on anyone person, company or government.
However, some large factors go into the current price of a gallon of gas. The first is crude oil.
The largest of course is the price of crude oil itself. A nice chart from the Department of Energy breaks down the components even further. With that, crude has been soaring over the past year now, and thus brings the price of gas along with it. West Texas Intermediate crude is trading for well over $100 a barrel at the time of this post and had been around $65 a barrel at this time last year. Believe it or not, during the recession in 2020 from COVID, those crude prices went negative as global demand dropped so quickly that facilities were filling up with unwanted oil. Of course, demand has now returned but suppliers haven’t been able to keep up with demand since making those cuts.
The next largest factor is gas taxes, which get assessed at the state, local and federal levels. These cannot be faulted though as the 18.4-cent-per-gallon federal tax hasn’t been increased in about three decades.
Finally, the other factors are a mix of other costs such as refining crude into gasoline and other fuels, transporting it to stations by pipeline and truck, and marketing it. Of course, these costs also include refiners’ profits for turning barrels of oil into gas, which recently have those profits continued to surge. Some refineries had closed due to the drop in fuel demand during the COVID-19 pandemic, which in turn means even larger margins for those that are still standing with demand having returned.
Hopefully this provided a little glimpse into what makes up the price of gas.
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