![]() ![]() The simple (and complex) reason oil prices have increased is because oil traders expect them to increase. World production and consumption of oil is about 95 million barrels a day - and those figures change by small degrees, not in swings that would explain a doubling of oil prices in only 18 months. So why is the price of oil higher? While the price of oil is related to supply and demand, it is even more directly affected by oil traders’ expectations of changes in supply and demand. Depending on the state, the final 10-15% percent of the cost is taxes.Īs is always the case, the changing price of crude oil is almost wholly responsible for the increase in gas prices. ![]() Distribution (again, including distributor profits) is 15 percent. Refining (including refiner profits) is currently about 20 percent of the cost of gas. The price of oil is easily the largest cost driver, usually comprising 50-60% of the cost of gas. There are four major items that comprise the price of gasoline: refining, distribution, taxes and crude oil. Except for companies that also have upstream exploration operations, refineries must purchase higher-priced crude oil to convert into gasoline. It is bizarre to blame oil refiners for some imagined unwillingness to produce more gas. Gas prices were an average of $1.20 higher in the first quarter of 2022 compared to a year earlier. Relative to gas usage, an extra $2.7 billion in ExxonMobil earnings is a tiny drop in the gas can, equal to eight cents for each of the 33.2 billion gallons Americans burned in the first quarter of this year. More from David Moon: Electric vehicles aren't a new idea Henry Ford flattened the market Related: Knoxville gas prices near all-time local high. ![]()
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