By Don Briggs, President of LOGA

In the last few weeks, you’ve most likely had the experience of standing by your automobile staring at the meter of a gasoline pump. Lost in disbelief, you watch the numbers tick away your hard earn dollars. Feeling ripped off and wondering why a gallon of gas is so high, you wonder what is going on. Feeling dij` vu? You should. Gasoline prices rise every spring just before the high demand summer months
Last week, the average price across the country for a gallon of regular gasoline was $3.20. Consumers automatically think “price gouging;” populist state legislators cry foul, Congress introduces “price gouging” legislation and demand investigations. Adding to the dilemma which consumers find themselves in, is the announcements of the huge profits of the larger integrated oil companies. In the past 40 years the oil industry has had 30 investigations by the Federal Trade Commission and state attorneys-general for collusion and price gouging. In all of the investigations, the industry was exonerated from any wrong doing.

So when you pump 20 gallons of gas into your vehicle and pay $60 to the establishment, where does the $60 go and who gets what?

Fifty percent is attributed to the price of crude oil, and as you know this is determined by the world crude oil market. Today the current price of West Texas Intermediate crude is roughly $64 per barrel. Some economists suggest a good rule of thumb is that for every $1 increase in the price of crude oil, the price of a gallon of gasoline will fluctuate by .02 cents.

Twenty-eight percent is attributed to the cost of refining. To me, the refining of crude oil is as complex as a refinery looks. One of the major effects on prices today is due to refinery fires this year.

Eight percent is attributed to the cost of distribution and marketing. Crude oil is transported to refineries, and then gasoline is shipped to distribution points and trucked to gas stations. The markup a gas station adds to a gallon of gas is normally around .02 cents.

Fourteen percent is attributed to the cost of taxes. Taxes include state, federal and sometimes local and vary from state to state. Louisiana tax on a gallon of gas is .20 cents, plus federal tax of .18 cents per gallon, for a total of .38 cents per gallon.

So the next time you are filling up, take a good look at the pump. Rest assured that though you would rather pay less and keep the change, you know why the price per gallon of gasoline is so high.