Letter: Breaking down where the oil money goes

Monday, May 15, 2006 | 7:19 a.m.

This is a snapshot - no claims, just simple math - of the production side of gasoline pricing at 9 a.m. on May 11, 2006. The spot (market) price of a barrel (42 gallons/barrel) of crude oil for June delivery was $73.45. That pegs the price of one gallon of unrefined crude oil at $1.75. The spot price of one gallon of refined unleaded gasoline was $2.20/gallon (Bloomberg.com). That leaves Big Oil 45 cents per gallon gross profit to refine crude oil, pay their employees, pay their taxes, explore for new oil, and make a profit for pensioners and our 401(k)s.

Let us now look at the retail sales side. As noted, the spot (market) price today was $2.20/gallon of refined product. Add the state and federal taxes of, on average, 46 cents/gallon and the wholesale price to the retailer becomes $2.66/gallon. The average retail price of a gallon of gasoline on May 11 was $2.92 (Bloomberg.com). This leaves 26 cents per gallon, out of which the local retailer must pay transportation, pay his employees, pay his taxes, and make a profit so he can feed his family.

If nobody in America took a wage or a profit providing our gasoline, we could fill our tanks for $2.21/gallon or $1.75/gallon if our governments did not tax it!

By the way, Shell Oil announced that they are planning to build a new refinery in Port Arthur, Texas - the first new refinery in America in almost 30 years. Any wonder where they get the billions of dollars to build it?

F. Jay Harrell, Las Vegas