The true cost of gas
(This was originally addressed to “Jim of Glenwood Springs,” who wrote “Having a laugh at Shell” in The Aspen Times letters to the editor, dated Oct. 11.)Dear Editor: I understand your frustration but you might want to read all about the components of your local gasoline price from the source to the tank of your car. I’ll give you a quick and easy way to figure the cost of gasoline from the posted oil price you see on TV and in the newspaper.Let’s start with today’s TV (Nymex) price of $58 per barrel. The purchaser of that crude pays severance taxes of 5 percent to the state of Colorado, Ad Valorem Taxes of 3 to 5 percent to the local county where the oil is used, Conservation Fund Levy of 0.15 percent.Now, let’s convert that oil to $ per gallon so you can compare to the pump price you see using the standard 42 gallons per barrel yields a price of $1.38 per gallon of oil (58/42 = 1.38). Now, let’s add in the Colorado taxes of $0.405 per gallon (API) to get $1.78. Refining adds 19 percent or $0.26, and Distribution and Transportation (trucks and terminals and pipelines) adds 9 percent or $0.14. We are now at $2.18 per gallon.Let’s look at the Roaring Fork Valley. Where is the nearest refinery? Where does your gas comes from? Denver, Salt Lake City, Houston? How much do you think it costs to truck that gas to the Roaring Fork Valley through the mountains? Some other things you need to consider is the gasoline blend required for this area. Does it have oxygenates like alcohol added to help with air pollution? Guess what – these location specific attributes add another $0.50 or so to the cost to the Roaring Fork Valley customer, and we arrive at a price of $2.68. I wonder what the pump price is in Glenwood today? The profit per gallon of gas is somewhere around $0.06 to $0.10 depending on the location. Shell gets some of that, and the local store owner gets the rest. How many gallons would you have to sell to make a living?As for how fast prices go up or down: I agree with you; it seems like they go up much faster then they go down. I think inventory has a lot to do with that along with store owners. I don’t have an answer on that one except that you don’t have to buy Shell gas. Drive down the street and buy Diamond Shamrock. They seem to be the cheapest and most responsive marketer.I hope I have shed some light on the reason why the price of gas is what it is by showing you the components of it from the well head to the pump. I would like to see a breakdown of the price of a walk-up ski pass. Now that’s gouging! Lets get the governor to look into that. You could buy a lot of gas for the price of a lift ticket.I haven’t mentioned the finding costs, long lead times from discovery to production, overhead, federal and state taxes. Do a Google search for “Primer for Gasoline Prices,” and you can read several good articles about this subject. You see it is not that hard to go figure the price of gas, if you study it.Glenn SlivaBasalt and Houston
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