Why gas costs so much

Why gas costs so much

Okay, I’m not an economist, nor do I work in the oil industry, but a little common sense plus a little digging show that the rise in the cost of a gallon of gasoline has less to do with anything George Bush or John Kerry can do as with other factors.

For instance, out of the $1.75 of the national average cost of a gallon of gasoline about 42 cents is tax. That’s an average; in Massachusetts, it’s closer to 50 cents. Another 9 percent of the total $1.75 is distribution and marketing costs (getting it to the pump and advertising it); 46 percent is the actual cost of the oil out of the ground, i.e. buying it from OPEC or whomever; and the final 19 percent includes both the refining costs and all of the profit to the various hands it passes through, the gas station owner, the big oil company, and everyone in between.

So why is the price rising so much right now? Well, it would help to consider that, adjusted for inflation, the cost of a gallon of gas is equal to what it cost in 1950. A 1980 gallon of gasoline would cost $2.80 in today’s money.

Written by
Domenico Bettinelli

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