Sunday, April 27, 2014

The Economy - Gasoline Prices

How are gasoline prices determined? Is it just a basic cost plus a profit margin? I wish it was that easy. Gasoline prices are a mess of all kinds of issues. you have the fluctuating cost of oil. You have the added cost of governmental regulations and taxes. You have the added cost of production. You then have the added cost of fear and uncertainty. Mix all that up and you get a mess when it comes to gasoline prices. Take the state of California. It has the highest gasoline prices in the 48 continental states. Why? Well, there is the cost of oil and the fact that California imports half the oil it uses. Then there are the many regulations imposed by not only the federal government, but by the state as well. Here in California the state has mandated higher oxygenated fuel in the summer which is accomplished by using ethanol. Since corn prices are higher this year, the cost of ethanol is high and thus, the cost of gasoline is higher. There is also the added production costs of using old refineries. California has not built a new refinery since 1979. in short, gasoline prices are a mess because of all the issues I just talked about, but the biggest problem with gasoline prices is government. If government would just get out of the way, gasoline prices would drop and we would all have a lot more money in our pockets.

What do you think?