Instead of listening to talking heads or talk show callers to learn about gasoline prices I decided to just sit down for ten minutes and do a little math. You know...the kind of math we learned in elementary school?
Instead of listening to talking heads or talk show callers to learn about gasoline prices I decided to just sit down for ten minutes and do a little math. You know...the kind of math we learned in elementary school?…
Article comments
26 - Joe
So Exxon made millions/billions. Now if Exxon would use some of those 'Excess Profits' to drill and seek more oil.... Oops, they CAN'T! Thanks to al those 'extreme', 'radical' liberals and conservationists that will NOT ALLOW Exxon to find our own, independent supply. Mexico can drill in the Gulf, but not the USA! Cuba can drill just a few miles from our coast, but not the USA.
And how much oil could be released for fuel use if all those major cities would finally convert to a few pounds of uranium to heat all those buildings!
And don't tell me about the 'Danger of Nucs!' If the Navy (Carriers and Subs) has personel living within two football field lengths or less of the 'reactor,' under water, for up to six months or longer at a time, with no adverse effects, I am sure that this country could produce an as equally SAFE system to replace oil burners for winter heat. The days of TMI are long gone!
It's time for sane, rational people it this country to stand up again, allow the inventor to come up with alternate means of transportation, etc., and NOT the radical individual, through a minority persuasion, have the government FORCE an unwanted, unsafe, undesirable vehicle, to all but the radical, on the rest of us!
27 - Nancy
I would just be happy if Exxon & their fellow pirates would release the technology they've already got for non-fossil/alternative fuels & the vehicles that run off them. But they won't, because it's easier to squeeze profits out of what they already have - a captive audience for their products, demand for which can only go up, as will their prices, as will their profits. I think it's going to take the danger of an actual revolution to get those bastards to make any changes at all.
28 - closedspace
64 Dodger: You stated that "One barrel of crude oil makes about 19½ gallons of gasoline". That is a cost of $3.59 per gallon of gasoline before refining, distribution taxes and markup. That doesnt make any sense.
29 - closedspace
I've reviewed several sources and found no reliable or consistant data on how much crude oil it takes to make a gallon of gasoline. (It seems like this is some secret that no one wants us to think about) Again, this article and conversation is nothing more than a meaningless utterance until this important fact is presented.
30 - buckeyenut
In looking around, it seems that the "normal" amount of gasoline from a barrel of crude is 30-40%. From there, it seems that the refinery has to work the oil (petroleum fractions) to get any additional percentages which will vary by the "mix" that is needed at the time. Therefore, there really is no set number of gallons of gasoline per barrel of crude. Personally, from the reading that I have done, I'd say they refine between 20-25 gallons on the average. I won't try to list all of the pages I've read. Sorry.
31 - Tommy
We need to focus more on the relative cost of gasoline. I have attached a link to an inflation adjusted cost of gasoline, I am sure there is another chart somewhere with the average miles per gallon of new cars.
Do I wish gas was cheaper? You bet!
Just think of a gallon of gas versus a gallon of milk.
To get Gas: Go to the ends of the earth, some of the toughest places and spend billions to extract crude, pump it into ships, pipelines etc to get to the refinery. Then refine into gasoline (a highly regulated process), put it into a delivery truck and deliver to your gas station, all along the way people need to be paid for their efforts and investments. It amazes me it still only $2.80 a gallon with all those taxes.
Compare this with a gallon of milk!!!
32 - fernando
regardless of rise of cost of crude oil, the profit of oil comapnies should not increase percentage wise.
example:
if i sold rice for $1.10/lb and each lb costs me $1.00, i am making a 10 cent profit on each sale or %10. if my cost of rice rises to $2.00, i would (and most ethical businesses would too) charge $2.10 which lets me keep the same profit and not $2.20 to keep a %10 profit.
as you can see, my profit stays the same and has been proven to keep my business running, if i do it by percentage then i would just be gauging and taking advantage of inflation and in turn making inflation worse.
33 - buckeyenut
re: Fernando
Over the course of time, the profit that you "were" making on the rice isn't enough to run the business. Thus you have to raise you take to continue to cover what it costs to move/handle your product and cover the increased cost of living that has occured over time as well.
The oil companies are in the business of making money. We just don't think they need to be making/keeping quite as much.
34 - closedspace
A barrel of crude is 42 gallons. Currently the cost per barrel is about $71.00. That comes to $1.69 per gallon or crude. If the yield is (30-40%) ,as buckeynut claims, a gallon of gas would take $4.82 worth of crude oil to produce. This number is obviously inaccurate. You can not have this debate without having these correct numbers. An increase in the price of crude vs. the increase in cost of gasoline is not a linear equation. Percentages are meaningless unless we know the conversion factor. Doesnt anyone understand this?
35 - Michael
I know this is somewhat off-topic, but here goes. If you are trying to figure out the rising costs of Healthcare, consider this. Let's say you have a car dealership that sells cars, there is a government program that ensures that everyone over 65 is assured a car. The dealership is required to sell cars to those over 65 and then they will be reimbursed 70% of what it cost them for the car. Each year more and more people turn 65. How does the dealership make up the difference to pay the rent and its employees?
36 - Ron
What everyone seems to be missing here is that how much profit does these companies make per gallon of gas. The answer to that question is 10 cents for every dollar sold. Now you figure that as Americans, we use about 160 million gallons of gas per day, and it adds up fast. Also, something that has been failed to be mentioned here is that the price for crude oil is set in a FUTUREs market. Which means we are paying the cost to replace that oil 2 months in the future.
Now the question becomes ok, how do we lower the price of gas? One reccommendation was cut the CEO's retirement packages. Ok, but, it only solves the problem for oh 1 day, maybe 2 days. Well, what about alternative fuels? Well, until they become practical and not to mention cheaper to buy and maintain, won't see that happening any time soon, then there is the hybrids, good concept, problem, very few are buying them. As a matter of fact, Honda is getting out of the Hybrids because they are not making money on them. Then there is the novel idea that we go and find our own sources of oil and build more refineries. Oh wait, can't do that, that would upset every environmentalist we have.
The fact of the matter is, that our gas prices are tied to the world oil market. You have countries like China that are buying more of the oil supply in the world, so there is less supply, therefore, the price of oil goes higher. Simple supply and demand market forces at work here.
So Exxon/Mobil made a 38 Billion dollar profit last year, good for them, they take the risk, they should reap the benefits. That's capitalism.
37 - doug
can someone tell me why i still see people with hummer,escalades around all the time? Dont they realize they are just wasting more gas? why dont people swtich to crossover or wagons?(safer,more fun to drive,eats less gas)its not like most people really need that big of a car anyway
38 - Jason
For #32 Fernando:
One of the things you are not taking into account with your "double-cost should not equal double-price" argument is that along with double cost, the rice vendor (or oil company) now has to spend twice as much to obtain the same amount of product. That means they need to have twice as much operating capital on hand to purchase their raw materials. How are you going to do that overnight if you don't also increase your profit a proportional percentage? And using your model, at what point does a company increase it's profits? Or are they forever locked in to that 10% or less? What you suggest simply isn't realistic, because it is far too simplistic.
39 - simplemind
Closed space ..If you go by energy yield ..there is a 20% penalty for gasoline. That is, for every 100 btu's of petro energy ..it takes 20 btu's to produce it. Since one btu looks like another
40 - Jackson Smith
Anyone who thinks that all the vehicles in the US could run on current Brazilian technology is just misguided. Go to Brazil or talk to people from that socialist country and you'll find out that most people can't afford a car and those who can afford one only get tiny cars or mopeds. Then they take a substantial loss in mpg when they use alternative fuels. Study this a little before you begin to imagine the utopia of Brazilian fuel enginuity.
41 - Andy Marsh
Answer for comment #37. Maybe it's because people can't just go out and buy a new vehicle? Maybe you're capable of paying for that new Prius, but the rest of us aren't in the financial situation to trade in a vehicle on a new one every time gas prices fluctuate.
42 - Tony
To those saying the number of what is produced from a barrel of crude is inaccurate seem to think that you ONLY make gasoline from a barrel of crude.
All of those products come from a barrel of crude, not just the gasoline.
"One barrel of crude oil makes about 19½ gallons of gasoline, 9 gallons of fuel oil, 4 gallons of jet fuel, and 11 gallons of other products, including lubricants, kerosene, asphalt, and petrochemical feedstocks to make plastics"
So that is a total of 43½ gallons of products from 44 gallons of crude, not just the 19½ gallons of gasoline.
Refineries fraction crude oil, basically "boiling" out different items from a barrel of crude in a refinery stack, collecting different products at different levels in the stack where they condense.
Refineries produce many items, not just gasoline.
43 - Tony
Sorry, I see it's 42 gallons of crude / barrel of oil. You get more due to other items added during the refining process.
To see more, look here:
44 - lj
If someone thinks that exxon can make a barrell of oil for $22 and they should sell that for $25, it will never reach them at the corner gas station.
Some middleman will snatch that barrell up and sell it at current spot pricing.
The best analogy I can think of is Red Sox tickets. You can't usually buy them at the box office. Season ticket holders get them and are analagous to fuel companies sitting on existing, producing well leases. They are apparantly allowed to "scalp" product at current market rates, despite getting their hands on that product at a lower fixed price.
People that wonder why more refineries aren't built shouldn't blame environmentalists. With the financial stakes plenty of 3rd world countries would allow foreign investement in a refinery with no annoying enviro laws in the way. Possibly a consistent return on investment hasn't yet been guaranteed?
45 - Joe
Enviros pollute the economy
46 - John Nettles ,Ridgecrest,Ca.
Why is it when the price of oil goes up the price of gasoline goes up at that minute almost,but when the price of oil comes down it is weeks before gasoline comes down?.
Why do they raise the price on the gasoline that is already in the tanks,but do not lower the prices until they have sold all they bought at the higher price?.
47 - wilton jackson
When I was younger I worke one hour for enough to buy ONE GALLON of gasoline. Now on Min, wage I can get almostTHREE GALLONS. Am I overpaid now, or is gasoline a real bargain ?
48 - Neil Goforth
I have heard enough statements like "crazy liberals wont let us get to our own oil"
There are oil wells in Texas that have not been used for years because our greedy companies DONT WANT TO USE IT RIGHT NOW. They want only a minimal amount of domestic oil to be used while they drink up everyone else's first. Of course that means starting wars and taking over oil rich nations (only to of course screw them up and ruin their oil production for the forseable future, but that is another story). Also, most of Alaska's oil is sold to Asia.
49 - Blue-Eyed Devil
Here's a thought:
Instead of applying elementary school mathematics to a macro-economical cost/profit model, howabout you spend a little more time researching the cost of production for gasoline. There is NOT a 1:1 correlation between the cost of gas as a function of the cost of crude oil.
TWO WORDS: margin cost
Look it up, understand it, then publish your ideas on the internet. Thank you.
50 - wil
November 27, 2006 · At about a dime a gallon, Venezuela has the world's cheapest gas. The low prices are the result of a big government subsidy. Motorists love it. They're buying cars at a record clip. Mediterranean living on the cheap gas for 60¢ a gallon Iraqi gasoline is the cheapest in the world at $.05 per gallon At three cents a litre, Venezuelans three cents a litre, a fraction of the 56 cents they would pay for a litre of bottled water or the 70 cents they would pay for a litre of milk so you tell what is fair price for gas