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Gasoline Prices 101
Gasoline, one of the main products refined from crude oil, accounts for just about 16 percent of the energy consumed in the United States. The primary use for gasoline is in automobiles and light trucks. Gasoline also fuels boats, recreational vehicles, and various farm and other equipment. While gasoline is produced year-round, extra volumes are made in time for the summer driving season. Gasoline is delivered from oil refineries mainly through pipelines to a massive distribution chain serving 168,000 retail gasoline stations throughout the United States. There are three main grades of gasoline: regular, mid-grade, and premium. Each grade has a different octane level. Price levels vary by grade, but the price differential between grades is generally constant.
The cost to produce and deliver gasoline to consumers includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs, and finally the retail station costs and taxes. The prices paid by consumers at the pump reflect these costs, as well as the profits (and sometimes losses) of refiners, marketers, distributors, and retail station owners.
Federal, State, and local taxes are a large component
of the retail price of gasoline. Taxes (not including county and local
taxes) account for approximately 31 percent of the cost of a gallon
of gasoline. Within this national average, Federal excise taxes are
18.4 cents per gallon and State excise taxes average about 20 cents
per gallon.Also, eleven States levy additional State sales
and other taxes, some of which are applied to the Federal and State
excise taxes. Additional local county and city taxes can have a significant
impact on the price of gasoline.
Refining costs and profits comprise about 13% of
the retail price of gasoline. This component varies from region to
region due to the different formulations required in different parts
of the country.
Distribution, marketing and retail dealer costs
and profits combined make up 13% of the cost of a gallon of gasoline.
From the refinery, most gasoline is shipped first by pipeline to terminals
near consuming areas, then loaded into trucks for delivery to individual
stations. Some retail outlets are owned and operated by refiners,
while others are independent businesses that purchase gasoline for
resale to the public. The price on the pump reflects both the retailer's
purchase cost for the product and the other costs of operating the
service station. It also reflects local market conditions and factors,
such as the desirability of the location and the marketing strategy
of the owner.
Click here to find out why gas prices flucuate so much.
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