How come the price of a barrel of oil is down 20% since its peak, but the price of gasoline is only down 10% from its record high five weeks ago?
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How come the price of a barrel of oil is down 20% since its peak, but the price of gasoline is only down 10% from its record high five weeks ago?
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A barrel of oil is only about half gasoline. The rest is other stuff, diesel, wax, asphalt, etc.
Ephraim, dear Ephraim, the price of a half barrel of oil has gone down 20% too.
It’s those darn speculators again… 😉
A barrel has gone down 20% = $33 / 22 gallons.
Half is gasoline. It’s gone down 20% = $16 / 11 gallons. $16 / 11 gallons means that the price of crude to get a barrel’s worth of gasoline has gone down $16 / barrel. The refiners keep the rest.
10% is half of 20%. Half the barrel is gasoline.
I wish I was a better writer.
Your writing is fine Ephraim. It’s your math that’s suspect.
A barrel of oil is 42 U.S. gallons. You say half of the barrel is for gasoline, so half is 21 gallons. The top price for a barrel of oil was around $145 — or $72.50 for the gasoline half. That’s $3.45 a gallon ($72.50 divided by 21).
The price for a barrel of oil now is, let’s say $116, or $58 for half. $58 divided by 21 gallons is $2.76 a gallon.
The price then of the crude oil used for gasoline has dropped from $3.45 to $2.76 a gallon, or 69¢ or — imagine that — exactly 20%.
Update: Here are the exact numbers as of Tuesday afternoon as reported by Bloomberg.
July 11th, highest price for a barrel of crude: $147.27. Today: $116.27. Difference $31 or a drop of 21.0%.
July 17th, highest gasoline price: $4.114. Average U.S. price today: $3.672. Difference 44.2 cents a gallon or a drop of 10.7%.
That is, crude prices have dropped twice as much as retail gasoline prices.
The amount of gasoline produced from a barrel of crude is a constant.
The percentage of crude price vs. pump price is affected by more than crude price. See:
http://www.rvinvestor.com/Commentary%20and%20Analysis/Oil_vs_Gasoline_Prices_20070507.htm
Aha Ephraim, now you are onto something. The price of a gallon of gasoline is just 60% or so due to the price of crude oil (the rest is transportation, refining, retail markup and taxes.
So let’s do some more math. At its highest price, crude was $3.50 a gallon. At its price today, crude is $2.77 a gallon. If all the other costs have remained constant, then gasoline should have gone down 73 cents a gallon. RIght?
But it’s only gone down about 44 cents a gallon according to AAA.
Someone is pocketing 29 cents a gallon. Could it be the oil companies?