18¢ jump causes concern

Late Wednesday, gas was selling in some area fuel stations for $2.91 per gallon. Those going through the morning commute Thursday were left scratching their heads when they saw $3.09 plastered on marquees at local gas stations.

John Hilbert, Cassville, who drives a company truck for his job, says he has driven it for about a month and a half and has put close to 8,000 miles on it. In that 8,000 miles he said he has paid about $3 per gallon average. If Hilbert’s truck averaged 15 miles per gallon, he would have used $1,600 worth of gas in that time.

“Of course, everybody thinks their too high, but you gotta have gas, said Hilbert. “They can jack it up as high as they want. We still have to pay it. We’ve got to drive to get to work.”

Hilbert said he travels the four-state area for his job and the highest he has paid for gas was $3.19 Thursday morning in Kansas.

Tracy Ackerman, life-long Carthage resident, says she doesn’t understand what is going on with gas prices.

“I don’t understand why it keeps going up and down, up and down,” said Ackerman. “What’s causing that? It was either last night or this morning it was $2.93 and now it’s up to $3.09.”

Despite the high prices Ackerman says she, as well as most Americans, must drive to get to work and get her two kids to school and other activities.

“I have no choice,” she said.

Ackerman also said she pays about $60 to fill up her car and uses up the gas in about a week.

“I probably go at least 50 to 60 miles a day transporting the kids to school, back and forth to work in the morning and evenings,” she said.

At $60 per week, Ackerman can plan on spending about $240 per month or close to $3,000 a year on gas alone.

Who’s to blame?

Gas has averaged more than $3 a gallon for four straight months and, more recently, has surged into record territory. Estimates of how high gas prices will go this year vary from $3.50 to $4 a gallon. But nearly everyone agrees that prices have higher to go.

Contrary to the views of many conspiracy theorists, gas prices aren't set by refiners or gas stations as part of a campaign to gouge consumers. Prices are a function of the open market, as manifested in the trading of futures contracts on the New York Mercantile Exchange, or Nymex.

Nymex gasoline futures have been rising, following oil, despite growing supplies of both commodities. Blame the falling dollar, which has made dollar-denominated oil contracts irresistible to foreign investors and to any investors looking for a safe haven for their money during a turbulent time in the stock market.

This buying by investors has pushed oil futures to a series of records in recent weeks, and the rest of the energy complex, which includes gasoline futures, has followed.

Unfortunately, consumers pay for this investment frenzy in the form of higher pump prices. And despite mounting evidence that Americans are cutting back on their gasoline habit — and might cut back even more drastically as gas gets more expensive — it might be some time before prices start responding to lower demand.

Large integrated oil companies such as Exxon Mobil Corp. and ConocoPhillips have generated record profits from the sale of oil, but those gains have been limited by falling refining margins. Contrary to popular belief, oil companies don't refine their own oil; their production units sell the oil they pump to the highest bidder, and their refining units buy the oil they refine from the least expensive source.

What are the components of the retail price of gasoline?

The cost to produce and deliver gasoline to consumers includes the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs, and finally the retail station costs and taxes. The prices paid by consumers at the pump reflect these costs, as well as the profits (and sometimes losses) of refiners, marketers, distributors, and retail station owners.

In 2005 the price of crude oil averaged $50.23 per barrel, and crude oil accounted for about 53 percent of the cost of a gallon of regular grade gasoline (Figure 1). In comparison, the average price for crude oil in 2004 was $36.98 per barrel, and it composed 47 percent of the cost of a gallon of regular gasoline. The share of the retail price of regular grade gasoline that crude oil costs represent varies somewhat over time and among regions.

Federal, State, and local taxes are a large component of the retail price of gasoline. Taxes (not including county and local taxes) account for approximately 19 percent of the cost of a gallon of gasoline. Within this national average, Federal excise taxes are 18.4 cents per gallon and State excise taxes average about 21 cents per gallon.2 Also, eleven States levy additional State sales and other taxes, some of which are applied to the Federal and State excise taxes. Additional local county and city taxes can have a significant impact on the price of gasoline. Refining costs and profits comprise about 19 percent of the retail price of gasoline. This component varies from region to region due to the different formulations required in different parts of the country.

Distribution, marketing and retail dealer costs and profits combined make up 9 percent of the cost of a gallon of gasoline. From the refinery, most gasoline is shipped first by pipeline to terminals near consuming areas, then loaded into trucks for delivery to individual stations. Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase gasoline for resale to the public. The price on the pump reflects both the retailer’s purchase cost for the product and the other costs of operating the service station. It also reflects local market conditions and factors, such as the desirability of the location and the marketing strategy of the owner.

The Associated Press contributed to this report.