The weather has gotten warmer, and the gas prices have gone up, that leaves many (including me) wondering... why do the prices change so often? and how do they change over the span of a few hours.
Hopefully this article from this month's Lincoln Statement will give you some answers.
Why Are Gas Prices So High? And Why Do They Change Over Night?
by Heidi Sutter-Voelzke Librarian Lincoln College of Technology
-These are questions I often find myself asking. We are all affected by the rising costs of fuel as much of what we buy, eat, and do is driven by our access to petroleum and petroleum based products.
So what's the deal?
As I write this on May 11th, 2011 average gas throughout the state of Ohio is around $4.05 per gallon. Americans are feeling the pinch. Although around the world people have been paying upwards of $5 per gallon for years.
There are A LOT of factors that combine to drive our fuel costs in the United States and I will attempt to distill (pardon the pun) them as much as possible, and leave the politics well enough alone.
Even though, as I stated above, there are many, many factors that contribute to fuel and oil prices in our country the actual equation is relativity simple and made of up four main components
Those are ...
Crude Oil + Refining Process + Retail Sales Distribution + Taxes = gas prices at the pump
However, these components do not figure equally in this equation.
Lets Break it down
Crude Oil - 69%
-finding the oil (keep in mind that oil is a finite resource and it's getting harder to find it and ... see next component... get it out of the ground)
-getting oil out of the ground
-transporting the crude to the refinery
-maintaining a reserve capacity of crude oil
-profit
Refining the Crude - 6%
-producing special blends of gasoline to meet local clean air guidelines
-transporting Gas to the stations
-maintaining the refinery and paying the workers
-profit
Selling the Gasoline at the Station - 10%
-operational costs
-marketing costs
-profit
Taxes: Federal and State - 15%
Knowing these components does not make you less angry at the pump, but does help you understand the price swings and dips better. The two largest components of this equation are the most volatile. There are many things that can interrupt the production of and the importation of oil and when this happens you see price spikes
While the good news is that consumers such as you and I will make decisions to drive better, more fuel efficient cars, whether out of choice or by pure economic necessity, the down side is that the price of oil will never be back down around the two dollar mark.
The oil that has been the easiest and the cheapest to access has all been used up which means that engineers and oil companies are requiring more technology, more man power, and more (bigger) machinery to access oil. This translates all to more $$$$. Also, the quality of the crude we are able to access is greatly diminished therefore, more refining is required to produce a usable product. More heat, more energy, and more man power is required to break those carbon bonds.
Also cultural and political unrest in the countries that own the largest crude reserves also make for an unstable environment and nervous investors. Also the suppliers cannot ensure an uninterrupted supply.
The taxes we pay on gasoline are not likely to go away either. Motorists in Ohio pay about 60 cents of taxes for every gallon at the pump.
It's no secret that prices on oil effect almost everything in our economy. With rising fuel costs we ware forced to become more efficient drivers, carpoolers, shoppers, and vacationers. Although learning to be a little more frugal is never a bad thing sometimes it can take a while for our salaries to keep up.
See this month's edition of the Statement for more tips and tricks to save fuel around town.
