Cost Breakdown of a Gallon of Gas
Posted by Max Dunn Wed, 09 Apr 2008 15:49:00 GMT
With gas prices spiking up, it is interesting to look at the breakdown of the cost of a gallon of gasoline.
A barrel of oil holds 42 gallons. So if oil is at $100 per barrel, a gallon would cost about $2.40. Refining the oil adds another $0.35 and taxes about $0.65 (in California). Add another $0.10 for distribution, marketing and profits, and you have a gallon of gas costing $3.50.
Using these same numbers, if oil goes to $200/barrel, a gallon of gas will cost almost $6!
What is the breakdown on the cost per barrel before refining and what kind of profits are made and to whom at $100.00 or at $200.00 a barrel? I might be way off, but the way I look at $140.00 a barrel oil is this. If profits can be made on oil at $40.00 a barrel, than oil sold at $100.00 more per barrel should be pure profit in some one’s bank account. On a conservative scale, if you were to produce 10 million barrels of oil per day, at $100.00 above cost that would result in a profit of 1 BILLION DOLLARS a day.
Ed Baker
Determining the cost of a barrel oil before refining is tough because a lot of the cost comes from exploration and field development costs. Saudi Arabia brags that it only costs them a few dollars per barrel to pull oil out of the ground, however, if you take into account all the welfare and subsidy benefits that Saudi Arabia provides its citizens, then their break-even cost is probably around $40 per barrel. On the other hand, Conoco announced the other day that its exploration and production costs had become so high that it is now costing them $100 per barrel for new oil.