The price of a barrel of oil has been a roller coaster lately, and it’s draining your wallet as fast as a long commute drains your gas tank.
And while our “new normal is the abnormal,” don’t expect to see things change very quickly. So how does the $100 per barrel oil breakdown when it comes to the price of a gallon of gas?
Tom Kloza, global head of energy analysis for the Oil Price Information Service, said that at $100 per barrel of crude oil, the raw cost to the refinery for a gallon of gas comes in around $2.40.
“Then the refinery these days probably makes about 60 or 70 cents a gallon on that product,” he said. “That puts your price up to about $3 wholesale. Average taxes are probably about 65 or 70 cents and the rest of it is margin for the retailer.”
He added: “A lot of people think the retailer loves it when prices are going higher.” But in a lot of ways, the retailers are just the messenger, he said.
“Earlier this month, they were probably making a nickel per gallon. Yesterday, they were making 50 cents a gallon or more. Their margins are really being whipsawed these days, and they’re kind of the messenger delivering the message, and people like to blame the messenger,” Kloza said.
While oil markets have quickly backed down from the $140 a barrel they had reached not long ago, the current price of around $100 a barrel is largely what analysts had been expecting this year. But there are a number of wild cards to consider, including European turmoil, and the potential impact of hurricanes this summer.
“You’re going to see some drops at the pump in the remainder of March,” Kloza said. “But that doesn’t mean that you’re not going to stick around with some pretty high prices from April through June. And then in the second half of the year, if Russia is still menacing portions of Europe, we may see very, very high prices like we’ve seen lately.”
Still, if you’re worried about inflation in the fuel price, Kloza said what you really need to worry about is diesel, which has also spiked significantly to $5.25 per gallon — up 40 cents from a week ago, and $2.06 from a year ago.
“It is going to impact all of the freight surcharges and everything that gets moved around the country,” said Kloza.
That means more inflation.
“Diesel is the more pervasive inflationary product and that’s probably the tighter product internationally,” Kloza added. “It’s the product that grows the most as you have economies exploiting resources and mining and agriculture and so forth. People don’t pay much attention to diesel unless they have a diesel truck or diesel car but that’s where we’ve really seen record high prices.”