Pump Pricing for Dummies
So just to summarize....
Just because a Barrel of Oil is 42 gallons and costs $105 does not mean you can expect to pay $2.50 when you fill up your gas tank.
Doesn't work that way.....
really this stuff isn't hard.
Any cost incurred by the Oil company to Refine, reformulate, and ship the Gasoline to the Gas Stations
is cost that has to be covered. No one wants to take a LOSS on selling you Gasoline at $2.50. No one wants profit margins to drop heavilly into the red.
So...Whatever the Refining Costs + Reformulations Costs + Shipping Costs has to be added...factored.
If we assume about 50 cents (hypothetically speaking) per gallon of gasoline is State + Federal gasoline tax....
Here's what you have:
$2.50 + .50 TAXES = $3.00
But, you go to the Gas Station and you end up paying nearly $4.00 a gallon..... not $2.50 + TAXES.
Cause again... The costs of shipping, refining, reformulating basically cost close to $1.00 a gallon.
Hence... You reduce those costs.....standardize the Formulation so Refining drops in cost and so on and you SLASH the price at the pump by dang near a BUCK.
So that $3.75 a gallon price..... instantly becomes $2.75.
And that brings us dang near close to the $2.50 a gallon price target practically over night.