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Gasoline Prices

Posted By Barry Ritholtz On August 30, 2003 @ 7:18 am In Current Affairs,Finance,Travel | Comments Disabled

A few factual tidbits re: rising gas prices; (labor day weekend often marks the peak in gasoline prices for the year). Its a subject I find many people are surprisingly naive about:

First off, by nearly any way you can think of measuring or comparing it, gasoline is extraordinarily cheap in the United States.

Compared to consumer prices in Europe or Japan, we pay about 1/6 of the taxes on it; Taxes in Europe are why gasoline costs more than double the US — Over $1 and change per liter — what it does here.

In terms of adjusting for inflation, the price of gasoline has remained a bargain. You are paying far less than what you paid in inflation adjusted

The price has hardly gone up over the past two decades; Its fluctuated from about $1.75 per gallon — the same price as 1980. In 1980, about $1.15 a gallon was for the actual fuel:

4usagaso [1]
Click for larger image (popup)
Source: Oilnergy.com [2]

The balance of what you pay are state and federal taxes, marketing and refining costs:

Fig1gaspumps2001 [3]
Click for larger image (popup)
Source: DOE [4]

Compare the price of gasoline ($1.75/gal) with Coca Cola (~$2.50/gal). Gasoline first requires crude oil to be explored and found, than extracted form the ground, shipped to a refinery, refined, then distributed and ultimately pumped into your tank. Meanwhile, Coca Cola is essentially colored, sugared tap water.

Lastly, a note on the “branding” of gasoline — most flavors are completely interchangeable; What is called branding is actually little more than marketing/advertising.

There are a few interesting exceptions: The 3 most prominent are Chevron, which uses a patented additive called Techron, (primarily a fuel injector cleaner); Some brands use an octane booster (ie, Sunoco, which sells a 94 plus octane). Lastly, BP/Amoco has their own proprietary formula for premium gas; Its unique, not pumped through pipelines, and only sold at Amoco stations. Many high performance car owners (I know) only put Amoco premium into their high horsepower (Ferrari, Porsche) engines.

Related Stories:
Startled Drivers Fill It Up, Up, Up [5]


One Vehicle on the Road, Two Others in the Garage [6]


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2003/08/gasoline-prices/

URLs in this post:

[1] Image: http://bigpicture.typepad.com/comments/4usagaso.html

[2] Oilnergy.com: http://www.oilnergy.com/1gasoli.htm#since20

[3] Image: http://bigpicture.typepad.com/comments/Fig1gaspumps20013.html

[4] DOE: http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/primer_on_gasoline_prices/html/petbro.html

[5] Startled Drivers Fill It Up, Up, Up: http://www.nytimes.com/2003/08/30/business/30FUEL.html

[6] One Vehicle on the Road, Two Others in the Garage: http://www.nytimes.com/2003/08/30/business/30TRAF.html

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