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Why Are Gas Prices So High?

2008-07-18T06:39:00.000-07:00

On everybody's mind these days is the insane price of gasoline. People complain about it in the office. At the dinner table, it has become a regular topic of discussion. You could turn on any major news network right now, and I'd be willing to bet that soon enough, the high price of gas would be brought up. But have you ever stopped to ask where all that money goes when you swipe your card at the gas station? The answers may surprise you.

The price you see up on your local gas station's sign is a function of four main factors. The largest cost is the price of crude oil delivered to refineries. Between 2000 and 2007, this single factor accounted for 48% of the retail cost of gasoline, and not much has changed in the past year. In 2007, it accounted for 58% of the retail price. Many things can influence the price that refineries pay to get crude oil. Supply and demand take their toll, of course, but one must also consider that in most cases, the crude oil that refineries buy is coming from foreign states. When you take into account sometimes strained foreign relations and the weakening of the U.S. Dollar, it is easy to see why the cost of crude oil has gone up so dramatically.

The next biggest factor in gasoline pricing has traditionally been Federal and State taxes. That's right, Uncle Sam wants to cash in on record oil prices, too. From 2000 to 2007, a whopping 24% of the price of gasoline was attributable to taxes. The burden has eased a bit in the last year as politicians face pressure to reduce the price of gasoline for Americans, however. In 2007, only 15% of the price of gas was due to Federal and State taxes. Don't be too quick to judge Uncle Sam on this issue, though. Many valuable programs are financed directly through tax revenues on gasoline.

The third biggest slice that makes up the price of gas is the cost to refine the crude oil into gasoline- and the profits made by doing so. This is where many people casually lay blame for high gas prices. You've likely heard the lament; you've probably even grumped about the record profits oil companies are making these days, and labeled them as the culprits. While there may be some truth to that in some respect, these numbers alone do not bear that accusation out. Between 200 and 2007, when the average price of gas was $1.91 per gallon, refining costs and profits made up 16% of the price of gas at the pump. In 2007, when the average price was near $3, they had increased that figure by a whole percentage point at 17%. Yes, these companies are making more, but their margins have not gone up significantly.

Finally, we come to Marketing and Distribution. Making up only 12% of the price of retail gasoline from 2000 through 2007, this is the smallest contributor to gas prices. Not much has changed, either. In 2007 alone, the figure dropped to 10%. Sources generally agree that this figure is likely to be the most stable in years to come, as marketing and distribution are the most easily controlled piece of the pricing.

Gas prices seem destined to continue to rise, at least for the next few years, and of course it very well may become difficult for some Americans to manage their gas bills. However, you may gain a bit of perspective by understanding how gas prices are derived, and therefore maintain a more positive attitude regarding it.

2008-07-18T06:00:00.001-07:00

5 Ways to Massively Improve Your Gas Mileage

2008-07-18T05:53:00.000-07:00

It would be nice if everybody could just drop down a big bag of money at the auto dealership and drive off with a hybrid. But not everyone has $25,000 just burning a hole in their pocket. There are still big ways to save on gas, however. In fact, the Environmental Protection Agency says that by implementing some minor adjustments to your driving, you can increase your mileage by up to 33 percent. I'll show you how to do much better.

1. Keep your car maintained
Here's an easy one. Check with your mechanic, and read your manual to make sure you are up to date with all the regular maintenance on your car. Simple things like replacing a dirty air filter can save you an average of 32 cents a gallon. Getting a tune up can save you 13 cents a gallon, and keeping your tires inflated at the proper level can save you another 10 cents a gallon. Plus, keeping a well maintained car has the added benefit of increasing the life of your engine.

2. Drive smoothly
Try to eliminate as many quick starts and stops as possible. The vast majority of your fuel is used to get your car up to cruising speed, so the longer you can keep your car at a steady pace, the more money you'll save. In fact, the EPA says that by eliminating excessive speeding, hard breaking and quick starts, you can save up to 92 cents per gallon. Imagine paying a buck less per gallon at the pump next time you fill up!

3. Shape up, lighten up
There are two forces that every car- hybrids, water fueled cars, standard gasoline powered cars- have to overcome in order to move. They are wind resistance and gravity. Consider removing attachments such as bike racks and car-top carriers, making your car more aerodynamic. A car top carrier on a mid sized sedan can knock as much as six miles per gallon off your efficiency. It's even simpler when it comes to dropping weight. Clean out your trunk, unload your car as soon as you reach your destination- do whatever you can to lighten your car, because for every 100 pounds you drop, your fuel efficiency increases by 2 percent.

4. Time your commutes better
What does the time of day you drive your car have to do with fuel economy? Simple. Avoiding traffic means driving more efficiently. With that in mind, try to stagger your work hours to avoid driving during the busiest periods. If you own more than one car, drive the most fuel efficient most often.

5. Convert your car to run on water
Sound crazy? Of course it does, but thousands of people are already taking advantage of the hydrogen in H20 by converting their car to run partially on water. Most people can hook up these kits themselves, and it generally costs no more than $150 to get set up. By taking advantage of water car technology, you can save up to 60% on your fuel. That's more than all the above tips combined!

Automobiles

2008-07-18T05:19:00.001-07:00

2008-07-18T04:40:00.000-07:00