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The Cost of Gasoline – Let Me Break it Down for You

Well, it actually will not be me breaking it down for you, but rather one of the great military veteran commenters in the comment thread of this post at This Ain’t Hell: Obama: You Just Don’t Get How Great I Am

The following comment was in response to the nonsense spewed by the liberal ignoramus “Anonymous”:

As for oil, it topped out June 2008 at 132.68 a barrel, but is now at 86.80 a barrel. And as for “We should drill here, now”. Don’t you see the genius of not doing that? We use the rest of the world’s oil, and then we use ours. Sure, we might not have it better, but our children and grandchildren will.

http://inflationdata.com/inflation/inflation_rate/Historical_Oil_Prices_Chart.asp [ ... ]

I referenced the price of oil, not gasoline. The gasoline companies set those prices (and get record profits doing so). [ ... ]

We have to buy gas, and they set the prices. Go ahead an look at some yearly statement of some of these companies, profits don’t lie. [ ... ] since June 2009, gas price has increase 85.33%, while in the same time period, oil price has increased only 22%. I’m all ears for a better explanation.

Hondo Says:
July 13th, 2012 at 3:33 pm

Anonymous: the fact that “oil companies set the price of gasoline” is nothing but a persistent myth.

The actual breakout (as of Jan 2012, when gas prices were virtually identical to what they are now) of the cost of a gallon of gasoline is as follows:

Marketing and distribution costs: 6%
Refining costs: 6%
Taxes: 12%
Crude oil costs: 76%

Oil companies thus “control” only approximately 12% of the retail cost of gasoline; taxes and raw material costs account for 88%. And half of the part that oil companies “control” is the cost of refining the gasoline from crude. That is rather essential in having gasoline. The process is very mature and likely cannot be substantially reduced any time soon.

Bottom line: except for panic spikes (like those occurring after Katrina), gasoline prices are pretty much pegged to the cost of crude. Cost of crude goes up, gasoline will go up. Cost of crude goes down, gasoline goes down. They operate generally almost in lockstep.

http://www.consumerenergyreport.com/2012/03/21/what-makes-up-the-cost-of-a-gallon-of-gasoline/

And supply and demand controls the price of crude. Oil companies don’t.

———-

Hondo Says:
July 13th, 2012 at 3:58 pm

Anonymous:
I would have thought someone who worked in the financial industry would understand the concepts of fixed costs and variable costs. However, here’s a simplified explanation.

Gasoline costs have 4 components. One is fixed, two are partially fixed, and one is variable.

The fixed component is taxes. (These actually can vary, but in practice do so so slowly that they can be considered fixed.) At current prices, these are about 12% of the total of each gallon of gasoline (on the order of 40-45 cents per gallon).

The two partially-fixed components are (1) refining costs (which include refinery profits) and (2) transportation and distribution costs (which include profits for distribution companies and gas stations). Each of these is about 6% of the cost of a gallon of gas at current rates – or about 15-18 cents per gallon. The former (refining costs) generates some profit for oil companies. The latter (transportation/distribution) generally does not. Both include huge amounts of fixed or otherwise necessary overhead costs (costs a bundle to refine the oil and to distribute it to gas stations).

The last component is the raw materials costs – e.g., the cost of crude. At current gas prices, this component accounts for about 76% of gas prices – or around $2.60 per gallon.

Now, cut crude prices by 1/2. That drops the share of a gallon of gasoline due to crude to approx $1.30 – but it has little effect on refining costs (maybe those costs drop by 10%, or about 2 cents per gallon) or on distribution and transportation (say those costs drop by 20%, or 4 cents per gallon). It has no effect on taxes per gallon. So the new cost of gasoline becomes $1.30 + $0.45 + $0.14 +$0.16 = $2.05.

This is a “quick and dirty” calculation, so it’s not exact. But it should be fairly close. So let’s check this analysis against history as a sanity check.
Crude oil cost $46.47/barrel on January 23, 2009. Regular grade gasoline cost $1.84/gallon on average.

Crude oil cost $84.96 about 2 weeks ago (June 26, 2012). Regular grade gasoline today costs $3.41/gallon on average.

Crude oil cost went up about 83% between January 23, 2009 and 2 weeks ago. In the same period, gasoline prices went up about 85%.

Any questions?

http://www.nyse.tv/crude-oil-price-history.htm

And that is why I love being a conservative: we have the facts on our side. It is also pretty obvious that the liberal was ‘reasoning’ with emotion (he started out whining about oil company profits and then assuming things based off that incorrect emotional assumption), while the conservative laid out the facts and then came to the conclusion. That’s the difference between liberals and conservatives. Liberals make up ‘facts’ to try to fit their worldview, while conservatives form their worldview after collecting the facts.

And Hondo’s takedown of the ignorant liberal is why I love This Ain’t Hell. The military veterans there are some of the most educated and informed and common sense conservatives online in addition to being great military heroes. Not to mention, they know how to take down liberal nonsense with some flair and humor!

Of course, as is to be expected with liberals, “Anonymous” could not admit to the fact that s/he was wrong, even in the face of facts completely destroying his/her ignorant opinion:

no, you obviously know more about the complexities of oil precaution then I do. I understand fixed costs and variable costs, but you’ve calling into question my knowledge of finance because I’m not as well informed as you about oil precaution. With that sort of hubris, I guess that you are well versed in fixed and variable costs of almost every industry out there.

Typical liberal. When they get owned by facts, instead of admitting they are wrong, they turn it around and throw insults at the conservative providing the facts. Pathetic.

Of course, as is the brilliance of the military guys on the site, Hondo gets in a nice jab in return:

Hondo Says:
July 13th, 2012 at 4:19 pm

Anonymous: no, I don’t claim omniscience in that area. I actually don’t work in either finance or the oil industry. But I would have thought you could have figured this out for yourself after you looked at the first article I cited, given your background in finance and the raw data contained in the article and otherwise readily available.

It only took me about 20 min to do the research and write each of the above comments relating to gasoline pricing. And I’m no expert in economics, finance, or the oil industry.

Heh. And with that, the “Anonymous” ignoramus did not return. Again, typical liberal. When faced with facts that discredit their ignorant worldview, instead of changing their worldview to fit reality, they fling some insults before stomping away in continued ignorance. Maybe he’s going to find out where to sign up for a class to teach him how to do simple research, since it’s pretty obvious he did not learn that while going to school for finance.

This is also an example of another debating trick that liberals love to use: appeal to authority. “Anonymous” started out claiming that s/he was an expert in finance, thus his/her *opinion* on gasoline prices and profits must be the right one. Yeah, not so much. A piece of paper from a university does not make one an expert. Appeal to authority means nothing. Facts mean everything. A high school freshman could have researched those facts and put the ignorant liberal snob in his place.

————————-

Heh, I forgot to include NHSparky’s great takedown of the ignoramus as well:

NHSparky Says:
July 14th, 2012 at 8:26 am

Go ahead an look at some yearly statement of some of these companies, profits don’t lie.

Yup – Exxon/Mobil makes a profit of about $40 billion on revenues of $450 billion. That comes out to about 9 percent. Pretty shitty if you ask me, especially compared to banks which have profit margins in the 30-plus percent range.

Also, I’ll trust Hondo @41; since June 2009, gas price has increase 85.33%, while in the same time period, oil price has increased only 22%. I’m all ears for a better explanation.

Not true. In January 2009, the average pump price was $1.81/gallon, and crude price was $43.91/bbl. In June 2009, gas price was $2.74/gallon, and crude was $69.13/bbl. Today, the average price is $3.43/gal with a crude price in June of $90.73/bbl, which is down from the post-2008 peak in March of this year of $117.79/bbl and gas nationall at that point was $3.97/gal.

So no, you fail.

———-

Oh, and before you think that $40 billion in profit on revenues of $450 billion is a lot, consider this, anon – in that same year, the federal government got over $105 billion in taxes, for doing nothing more than sitting on their asses with their hands out.

Amazing how someone supposedly educated in finance cannot do simple math.

If you like that, go read the rest of the comments. They also take down this liberal clown with regards to its claim that unemployment has improved under Obama. Yeah, the ignoramus actually made that comment.

July 15, 2012 , 12:36AM Posted by | Conservatism, Economy, Gas Prices, Liberalism | Comments Off

Obama’s Got a Really Bad Economy, but that’s Nothing that a Little Gay Marriage Won’t Fix!

Pretty damn sad that the SCOAMF’s solutions for the piss-poor economy he created remind me of jokes from Friends.

A couple months ago, the same joke could have been made while Obama and the Democrats were pushing the ridiculous “war on women” smear.

“Obama’s got a really bad economy, but that’s nothing a little free contraceptives won’t fix!”

Yeah, brilliant.

First he’ll fix the economy with contraceptives. Now he’ll fix the economy with gay marriage. I wonder what his next “fix” will be. If he even bothers to remember the economy at all…

[Scene: Central Perk, Chandler is reading on the couch while Joey, still suffering from his hernia, is returning with coffee for them both. After a series of grunts and groans he manages to painfully walk back from the counter, sit down, and slide Chandler his coffee.]

Chandler: Hey, will you grab me a cruller? (Joey starts to groan and get up.) Sit down! Will you go to the hospital?!

Joey: Dude! Hernia operations cost like, a lot probably. Besides it’s getting darker and more painful, that means it’s healing.

Chandler: I will loan you the money. Just go to the hospital and let’s just get that thing… pushed back in.

Joey: Thank you, but it would take me forever to pay you that money back and I don’t want that hanging over my head. Okay? Besides, as soon as my insurance kicks in I can get all the free operations I want! Yeah, I’m thinking I’ll probably start with that laser eye surgery too.

(Phoebe enters.)

Phoebe: Hey!

Chandler: Hey.

Joey: Hey!

Phoebe: What’s going on?

Chandler: Oh Joey’s got a really bad hernia, but that’s nothing a little laser eye surgery won’t fix!

May 10, 2012 , 9:52PM Posted by | Barack Obama, Economy, GLBT Movement, Homosexual Movement | Comments Off

Public Sector Unions are a Money Laundering Operation for the Democrat Party

Plainly and simply, that is why Public Sector Unions exist: to launder money from the American taxpayer to the Democrat Party.

Via the Maha Rushie: Governor Scott Walker Isn’t Caving

Also, this from The Tatler: “State Rep. Nick Milroy is the Democratic state representative from Wisconsin’s 73rd assembly district.” He was on the radio. One of the hosts “pointed out that union membership was split by their votes in 2010, 49% for Democrats and 47% for Republicans, nearly an even split.” But, despite the fact that union members vote almost 50-50 Republican-Democrat, unions donated 93% of their total contributions to Democrats.” Only 7% to Republicans, yet half of the union members vote Republican. So there’s quite a disparity. Union members vote 50-50, essentially, but 93% of their dues goes to Democrats. “The question was asked if the assemblyman could understand why Republicans were not in favor of having tax payer funded dues go to fund Democrat campaigns? The assemblyman contended that public employees can opt out of the unions. But when pressed about how even those that opt out must pay union dues, the assemblyman suggested that those people that didn’t want to be part of a union could find other work.”

He said if people don’t like paying union dues that are used to support Democrat candidates they can always get another job. So be it. That’s your choice. If you don’t like the way your union dues is being spent, quit the union, get another job. If people don’t like paying dues that are used to support Democrat candidates they can always get another job. Notice how this is a one-way street. And how about these union members voting for Republicans getting literally no representation whatsoever for their donations? Zilch, zero, nada. Of course the point here is not quitting, people don’t like paying union dues. That’s not the point. The point is what about the taxpayers who don’t like paying the dues? Because that’s who’s paying the dues.

Can we go through this again? What we have here is a money laundering operation. You have public sector employees. They are members of public unions. These public unions support Democrats 95% to 100% of the time with money. Who pays the salaries of state unionized employees? Taxpayers do. Not some evil CEO fat cat. Joe Six-Pack. Joe the Plumber. Whoever it is, Mary the Riveter. These people living in Wisconsin, their taxes hire and pay the salaries of public sector unions which are already twice as high as what they make. Then, the dues from these union workers go to the Democrat Party. So the dues originate in the wages earned by private citizens. So it’s Joe Six-Pack and Joe the Plumber and all the other taxpayers in Wisconsin whose money is going to the Democrat Party via a money laundering operation through the unions. That’s what’s happening, pure and simple. That’s the real question. That’s what’s going on.

March 10, 2011 , 1:01AM Posted by | Democrats, Economy, Liberalism, Socialism, Unions | Comments Off

We are in a Classic Debt Spiral from Which There is Probably no Escape

CHANGE! Gotta love liberalism.

Via Monty at AoSHQ: DOOM, Served Hot Off the Grill

Read this link and weep. We are in a classic debt spiral from which there is probably no escape. The mandatory spending numbers will never go down, and debt-service will eat ruthlessly away at the remaining portion of the federal budget. (Most of the states are in the same fiscal boat.) Pretty soon, our government will exist to do two things only: send out welfare checks, and pay the vig on our mind-boggling debt.

And even our debt, formerly considered a safe haven by nearly everyone in the world, ain’t what it used to be. This is why our borrowing costs are going up… way up. Pull quote:

The major entitlement programs — Social Security, Medicare, Medicaid — other “mandatory” spending, national defense, and interest on the debt make up more than 80 percent of federal spending.

[ ... ] We cannot tax our way out of this hole. We cannot grow our way out economically. We cannot use demographics to work our way out over time (in fact, we’re barely maintaining a replacement rate of reproduction as it is, and most of that reproducing is among the least productive of our citizenry).

We cannot vote the problem away. The only solution that would really work — draconian cuts to entitlement programs and a serious effort to pay down the national debt — would require a level of austerity that few Americans have the stomach for. This means that a political solution to this problem is also pretty much impossible. There is no political solution to this dilemma because neither the citizens nor the politicians are willing to do what is necessary. (Nor is it simply a Democrat/GOP divide. As we have all seen in the Social Security threads I and others have posted, even many conservatives bristle when faced with cuts to their own programs.)

Example: all liberals, and even many conservatives, quail at the harshness of the so-called “Ryan Roadmap”, and insist that it’s not “politically doable”. Well, guess what? The Ryan roadmap is the best attempt by a politician I’ve seen so far at solving this problem — and it barely scratches the surface. Even if every single one of its reforms were adopted right now, it probably would take decades for us to get back on an even fiscal keel. And I don’t think we have that kind of time.

We lost this battle when the debate stopped being about whether the government should provide a gigantic welfare state, and began to be about how we would fund it.

Remember this, if you remember nothing else: it will never be any easier or cheaper to fix this problem than it is right now. The longer we wait, the more catastrophic the outcome will be. If we will not impose discipline on ourselves, the market will do it for us.

Meanwhile, Obama goes golfing and Democrats, instead of doing the business of the people they were elected to do, decide to run and hide from their States and refuse to participate in representative government.  All the while, liberals (ie public sector unions who only care about themselves), instead of working to save the nation, work to destroy the nation and harass with vulgarity and violence the few people who are working to try to right the ship.

CHANGE!

March 10, 2011 , 12:41AM Posted by | Communism, Economy, Liberalism, Socialism, Taxes | Comments Off

Barack Obama Paid for, Organized, and is Putting on the Wisconsin Riot

CHANGE! Civility!

This is what you get when you vote for President a Saul Alinsky- and Billy Ayers-trained community agitator whose core ideology comes from socialism, communism, Marxism and Black Liberation Theology.

Via AoSHQ: Goverment Workers’ Nuclear Response: They’re Going to Prevent the Assembly From Entering the Capitol?

So, via Instapundit, the unions have taken the building and apparently intend to hold it hostage.

At Hot Air, video of the chaos.

Ominous warning from Ann Althouse’s husband, who’s at the building, and telling people to stay away:

“ANYBODY CAN GET IN AND ANYBODY CAN BRING ANYTHING IN. THERE IS ABSOLUTELY NO SECURITY WHATEVER.”

They’ve already broken doors and windows. Next up will be the actual deaths, or burning the building down.

Michael Moore has declared “war” so, as Instapundit says, the era of “civility” is officially over, in case you were unsure.

[TEA Party] peaceful protests — consisting of, at worse, jeering and hooting officials — were deemed terroristic threats and their actual violent hijackings of public buildings and calls for “war” are, what?

One more point borrowed from Mr. Althouse:

“Barack Obama paid for, organized, and is putting on this riot.”

Community organizer in chief.

March 10, 2011 , 12:04AM Posted by | Barack Obama, Economy, Leftist Groups, Socialism, Unions | 10 Comments

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