June 29, 2009 by esarsea
The following post is a cut and paste from the blog I maintain for the company I work for, A Plus Transportation. Although it deals with diesel prices, I thought it might be interesting to toss around over here.
(Click on the graph above to view a larger, more clear image)
There are many factors that contribute to the cost of diesel fuel. Naturally, the cost and supply of crude oil plays a major role in the cost of fuel – but you may be surprised to learn that the cost of crude is only responsible for 64% of the price you pay at the pumps. Click on the highlighted text to view an excellent primer on diesel prices offered by The United States Energy Information Administration.
According to the EIA, the factors that influence the price we pay at the pumps include the cost of crude oil, tight refining capacity and international diesel fuel demand, product supply and demand imbalances, seasonality in the demand for diesel fuel and distillates, transportation costs, and regional operating costs and local competition.
As previously noted, the EIA reports that crude oil prices are responsible for 64% of the price we pay at the pump. The EIA also reports that refining is responsible for 21% of the pump price, followed by taxes (10%) and marketing and distributing (5%).
With this in mind, it’s interesting to look at the chart above. From all appearances crude oil prices dropped immediately from an all time high of $145-plus a barrell when President Bush lifted a ban on offshore drilling on July 15th 2008, and immediately began to rise again when President Obama reinstated the ban on February 17th, 2009. The chart above only shows through June 1st of this year, when crude oil reached $66 a barrell. Crude oil prices today are $71 a barrell.
I’m no expert on the matter but I suspect little if any progress towards actual offshore drilling and additional oil production was accomplished within the brief, 7 month window during which the ban was lifted. Yet it would appear that a simple perception of our intentions resulted in a $100 per-barrell drop in crude oil prices.
I’m not a particularly political person, but it does beg the question: Do President Obama’s actions reflect his concern for the environment, or do higher oil prices better enable him to gain support for heavy regulations and bureaucracy on the energy industry, among others?