Something I do not understand:
- barrel price went from $100 to $60. That's $40 drop.
- Price went from $3.60 to $2.80 a gallon in my city. That's $0.80 only
I don't get it.
- barrel price went from $100 to $60. That's $40 drop.
- Price went from $3.60 to $2.80 a gallon in my city. That's $0.80 only
I don't get it.
The price of gas is only partially due to the cost of oil. Taxes make up a pretty chunk of the cost of gas. On average $0.50/gal.[1]. Don't forget the cost of refining and transportation. This chart says 62% of the cost of gallon is due to crude oil costs[2]
So based on your $3.60/gal, $2.23/gal is oil. Reduce that by 40%, you get $1.33 and add back in the other stuff and I get $2.70/gal now.
Not far off huh?
[1]http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States [2] http://www.eia.gov/petroleum/gasdiesel/
You put the same wear and tear on the road at $1/gal vs. $4/gal. Trying to create budgets against a commodity that rapidly changes prices as much as gas/diesel does would be rather difficult.
For example, in 2015 we'd be forecasting huge budget shortfalls for any planned road maintenance due to the unforseen huge drop in gas prices.
Tax is tax, money is fungible.
Why should I be taxed to fix road damage based on a metric that doesn't begin to accurately reflect my actual contribution to the problem?
Additionally, if the trucking industry had to raise rates due to a higher 'road maintenance tax' this may also make more efficient forms of transportation more popular, ie trains.
The fact that more fuel-efficient drivers pay less taxes is a bonus, since fuel use has negative externalities.
Personally, I don't understand why we don't have more flexible tariffs in place to secure against this kind of influence.
http://www.salon.com/2014/12/12/like_low_gas_prices_so_does_...
But as someone said, crude oil prices reflect future retail prices. When you go to a gas station you get fuel that is weeks/months old, so it makes sense to pay the price that crude oil was selling at weeks/months ago.
Here in Chicago, they never dropped. There's almost a $1.00 difference in gasoline vs diesel now.
The cost of the raw crude oil is only part (but a significant part) of the pump price.
It's more 'fun' in the UK where fuel duty and other taxes (VAT) form the majority of the pump price:-
There's also the fact that the oil prices generally reflect future prices. Gas stations need the physically delivered commodity. There's some small fluctuations there.
I don't have a deep understanding of how gas stations work, if anyone else has insights would love to hear them.
This is a gross simplification. I'm not an expert or someone with a deep understanding of how gas stations work, but even I understand that a barrel of crude requires a complex process to turn it into gasoline and even more logistics to get it to the pump. Every one of the people in that process needs to be paid, including your friendly neighborhood gas station cashier.
This line of thinking is the equivalent to wondering why the price of a new car hasn't decreased if steel prices hypothetically dropped. Most products cost much more than their raw materials because to change them from raw materials to products and to put that product on a shelf requires the hard work of many people.