How come oil prices per barrel aren't directly proportionate to gas prices at the pump?

when oil prices were hovering around $40 per barrel, gas prices were typically around $2 - $2.50 per gallon. now that oil is around $80 per barrel, gas prices (depending on region of course) seem less than twice the $2 - $2.50 per gallon i would expect. they're closer to $3 instead of $4 - $5. are they being subsidized?How come oil prices per barrel aren't directly proportionate to gas prices at the pump?
Crude prices account for about 53% of the cost of gasoline.


http://www.eia.doe.gov/pub/oil_gas/petro鈥?/a>





19% is state and fed taxes.


19% is refining cost.


9% is ';distribution and marketing';





Your suspicion is correct. There are no new refineries or refinery capacity. Taxes have not changed. A 42 gallon oil barrel produces about 21 gallons of gas (plus other products).





So, if crude rises $1/barrel that should translate into 1/20th of that cost (5 cents) being passed on to the production costs of gasoline.





Your facts are not correct. Gas was not $2-$2.50/gal when oil was $40/barrel. That was for more like $60/barrel.


Still, now at $87/barrel, I would have expected


(87-60) * .05 = $1.35 increase, or about $3.85/gallon by now.





Why hasn't it gone up? Simple. The oil companies are full of crap. They do not charge you what it really cost them to make the gas you are buying at the pump. They produce it, stockpile it, and then you pay for it based on market demand, NOT based on what it cost them to put it in those storage tanks.





When Katrina hit the Gulf, gas prices jumped almost a whole dollar a gallon in a week. Yet we were all still using gas that had been produced months before that.





Oil prices are rising because winter is coming, and investors are speculating that when the oil demand climbs for heat, people will have to pay through the rear end, and they are right. And that won't have anything to do with gasoline consumption.





The oil companies hadn't had a price increase since the early 90s, when gas was about $1.25. We had been paying that price for 10 years. No business can stay in business that way. All of the recent events (Katrina, demand, the war) are all convenient excuses to basically get the price up to $2.50/gallon which would be inflation-equivalent to $1.25 in 1990. Now that the price is there, it will stay there until the oil companies want more. Right now, they feel $2.50 is the ';sweet spot'; where demand will not decline, and people will pay.How come oil prices per barrel aren't directly proportionate to gas prices at the pump?
Supply and demand market forces are complex. If the oil company's had a monopoly, then I would wonder about company's fixing prices. I think we're lucky to have the oil company's in our country and I don't think there's a price fixing problem at present. The US Government may do things to keep gasoline and diesel prices lower to help the economy. But in the long term, the Government must let market forces prevail.
The hydrocarbon mix we buy at the pump is a very, very small proportion of a ';barrel'; of crude oil. The refining process , to be very basic, is performed by heating the crude, and, drawing off and condensing the liquid vapors at various stages up a long tube. for example(and once again, being VERY basic), at 2 feet off the ground, boiling crude oil in a tube, poking a hole in it and draining the gases and condensing them would give you asphalt. 10 feet higher up the tube would give you kerosene, 5 feet above that, gasoline, 5 feet above that, navigation fuel, etc.


Also, there's all kinds of taxes involved, subsidizing, you name it. We're still the cheapest in the free world for gas prices-but don't expect that to continue. We have officially bypassed the halfway point in crude oil-we've already used up, half of the world's crude deposits. Can you alternative fuels';? And don't let anyone tell you that e85 is the answer-it currently takes about a gallon and a half's worth of the energy from crude to make one gallon of e85-kinda stupid to buy it, eh?
Oil (crude) is only part of the cost of gasoline.





The poster above wrote that supply and demand has large affect on the cost of the gas. This is largely true. But what people forget is that ';supply and demand'; is just fancy way of ';price gouging'; or ';get the max out of the customer';. Recently after Katrina flood, there was few programs questioning ';price gouging'; vs. market demand pricing.





In the end they were pretty much the same thing.





That's is the reason why last year Exxon had the most profitable year of all times. If they lowered their profit they would lower the price. But why, when we suckers are perfectly willing to pay.





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So to answer you question -why: Because if they (the oil company) charged more, then people would really re-think and actually scale back - costing their volume and profit.








Good Luck - and thanks for the question - I kind of vented too.