Saturday, June 28, 2008

Gas price per day is more expensive than car rent

I spent 30$ for rental car, but paid 34$ for refilling gas for a small trip to city. I did little search/research on Google.

Possible reasons for increase:
* Production is sligtly lesser than consumption. Production in venuzula and Iraq reduced world production by a slight margin. Consumption in Asia and Africa slightly increased.
* Weak economy and dollar got devalued.
* Speculation and arbitration compounding with war and political instabilities.

Present price decomposition:
Gas price per gallon: 4 dollors.
Crude oil: 3 dollars.
State and federal taxes: 27 cents.
Refining costs: 40 cents.
Transportation, distribution and marketing costs: 24 cents.
Station Markup: 10 cents.

Consumption: US consumes 20 million barrels of total oil per day, that is 420 million gallons of oil, and uses around 200 million gallons of that total for motor gasoline. Assuming average vehicle mileage is 20 mpg, it is used to drive 4 billion miles per day. There are around 200 million total vehicles in use. So each car drives 20 miles a day, which is reasonable. World consumes 85 million barrels per day, and china, Japan, India and Brazil consume 20 million barrels per day. These countries are growth rate per year is 8 percent and is expected to grow.

Supply: US produces around 8 million barrles per day of its need. It imports around 4 million barrels from Arab counties, around 4 million barrles from Canada and approximately 4 million barrels from Mexico. Arab countries produces around 9 million barrles per day and all countries together produce around 82 million barrles per day. Supply is lesser than the demand, but oil reserves compensate it. There is no shortage of oil for half decade or so, and infact countries started investing in producing more oil.

Refinaries: Important factors adding to cost are operating cost, distance to refinaries, fedaral and state laws for minimal quality of oil and cleaner burning standards add to cost.

* How gas prices work.
* The future of oil.
* vechicle statistics in US.
* Oil supply and consumption
* Oil production statistics
* Oil reserves in world
* Fundamentals of gas price increase.

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