What You Really Pay for at the Pump

Oil is a big part of gas prices, but taxes, refining costs, and distribution play a role, too.


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Distribution/Marketing. The remainder of what you pay at the pump goes even further downstream: distribution, marketing, and retailer costs and profits. After the refining process, the resulting gasoline is transported by pipeline and delivered by tanker trucks to thousands of gas stations and retailers throughout the country. Although a number of factors cause the actual figures to vary, including the cost of the finished gasoline product, overhead, and other operating expenses, distribution and marketing makes up 9 percent of the total cost of a gallon of gasoline, on average. Add that to profits oil companies make in the refinery process and Big Oil's profits actually come out to less than you might think, Joutz says. "The part where oil companies are really participating in this is about $0.50 out of maybe $3.40," he says. "There are thousands of gallons of gasoline sold everywhere so it does add up, but it's just not the take that people think it is. The big thing is the price of oil per barrel."

A prolonged increase in oil and gas prices could translate into bigger problems for the recovering U.S. economy, as consumers are forced to reevaluate their spending habits. "We've seen gas prices rise from somewhere in the neighborhood of $2.85 not too many months ago to about 3.50 on a national basis, which can't but help have some consumption impact for consumers," Luschini says. "That's a bit worrisome [because] that money's being siphoned from [their] discretionary funds that would otherwise be spent at stores and restaurants."

How it all plays out depends on whether political and social strife continues to roil the Middle East. "This may very well prove to be transitory," Luschini says. "If we see some calm restored into North Africa and in the Middle East, then you're likely to see oil prices abate to probably something less than $100 a barrel."

Twitter: @mmhandley