The Plunge In Gas Prices May Not Be The Blessing You Think It Is

Pumping Gas

Photo: AP Images

Gas prices have retreated and that’s a good thing…sort of. The average for a gallon of regular gasoline is $3.38, according to AAA, down from a high of $3.93 in April. Sure it was terrible to pay an extra $0.55 a gallon to fill up your tank, but today’s relief comes with an asterisk.The run-up in prices at the pump was caused by a $35 rise in crude oil that occurred from $75 a barrel in October to $110 in April. The price of crude is responsible for two-thirds of the increase in gas prices. 

Here’s a breakdown of $1 at the pump as of May 2012, when the national average retail price of a gallon of regular gasoline was $3.73, according to the Energy Information Administration:

  • Crude oil: 66 cents
  • Refining costs and profits: 13 cents
  • Taxes: 11 cents
  • Distribution, marketing and retail costs and profits: 10 cents

Gas prices are now just about where they were in October, when economists and investors worried that the European debt crisis would drag down the world economy. From October to the beginning of February, European fears simmered down; economic data improved; and Indian and Chinese demand increased for raw materials. The result was a near-20 per cent bump in stocks and an increase in crude oil from $75 to $90 a barrel.

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