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What You're Really Paying For

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Despite what you might have heard from the media, the price of gasoline is not based solely on the price of crude oil. Just like any other consumer product, there are several entities that profit from the sale of gasoline.

• Crude Oil- Crude Oil takes the largest percentage of the money you pay for gas. As of February 2006, 59% was going to crude-oil suppliers. This price is determined by the nations that produce the oil, namely the Organization of the Petroleum Exporting Countries (OPEC). The price is determined by how much oil is being produced and by the quality of oil that is being produced. Light, sweet oil is easier to refine than heavy, sour oil. There is an ample supply of heavy, sour oil, but the cost of refining it is much higher. The amount produced is a reflection of what is going on in the world. After Hurricane Katrina, the price of crude oil per barrel rose from $42 to $70.
• Refining costs- The percentage of your money taken to refine the oil is about 10%.
• Distribution and marketing- Transportation of the crude oil is another expense to consider. Crude oil must travel to refineries, then to the distribution point, and finally, to the gas stations. This, as well as marketing the brand of the oil company, accounts for about 11% of what you pay.
• Taxes- Taxes account for another 20%. This includes both federal and local taxes. Federal excise taxes are about 18.4 cents per gallon and state excise gas is about 20 cents per gallon. In addition, there are state sales taxes, as well as local and city taxes. If you are cringing at those numbers, you should consider that fact that in Europe, taxes on gas have been as much as 78%, bringing the cost to around $6.00 a gallon.
• Station markup- Typically, gas stations tack on only a few cents per gallon. The individual stations determine the amount charged above invoice, although some states have regulations about how small a markup can be made. This is to prevent large companies, who can afford to slash prices, from driving out independently owned stations.

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