The price of a gallon of regular-grade gasoline has more than tripled in the past eight years, increasing from $1.29 in 2000 to over $4.00 today.  The increase has been blamed on oil producers, consumers, speculators, refiners, global political events, and even gas station owners. It’s impossible to untangle all the supply and demand forces that determine the price of gas. But according to the Energy Department, the cost to produce and deliver gasoline to consumers includes these four components:

·       the cost of crude oil to refiners

·       refinery processing costs

·       distribution and marketing costs

·       taxes

In 2000, the price of crude oil was roughly $24 per barrel, and crude oil accounted for 47 percent of the cost of a gallon of regular-grade gasoline.  As the price of oil has increased, so has its share of the price of gasoline. By this May (when oil cost $114 per barrel), it accounted for fully 75 percent of the cost of a gallon of gas.

In contrast, the share of the gas price attributable to refining costs and profits is now just 10 percent. Since 2000, this share has fluctuated between roughly 10 to 25 percent. It tends to spike seasonally in the spring, and vary from region to region, mainly because of to the different gasoline formulations required in different parts of the country.

The cost of distribution and marketing currently accounts for about 5 percent of the cost of a gallon of gas. This is at the low end of the range seen since 2000.

Finally, taxes (federal and state) currently account for about 11 percent of the price of gas. In 2002, this share was as high as 38 percent. It has been trending downward, largely because gas taxes have not changed much (the federal excise tax is 18.4 cents per gallon, and the average state tax is 21.5 cents).  As the price of gas increases, these relatively fixed taxes represent a smaller share of the total price.

The situation is much different in other countries where gas taxes are higher. The gasoline tax is $1.26 per gallon in Canada; $5.05 in the United Kingdom and France; and, highest of all, $5.57 in the Netherlands. Taxes account for a much larger share of the price of gas in these countries. In the Netherlands, they account for 50 percent of the $10.05 per gallon price.  There, the cost of crude oil, even after its recent surge, accounts for only about 30 percent of the price of gas—far less than its share in the United States.

The surge in the price of crude oil has affected gasoline prices around the world, but the impact has been greatest in countries with relatively low gas taxes, like the United States.  Europeans are paying more for their gasoline just like us, but the percentage increase in their price has been smaller—because they already paid much higher prices to begin with.

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