Editor’s note: This is a transcript of the audio file.
If you’re paying in the neighborhood of $4 for a gallon of gas, you’re probably wondering where all that money you’re shelling out at the pump is going. We have an answer. I’m Doug Whiteman with your Bankrate.com Personal Finance Minute.
According to most estimates from the industry group the American Petroleum Institute, 71 percent of what you pay for gasoline goes to refineries, to buy oil to make more gas.
The institute says it takes one gallon of oil to make a gallon of gasoline. The price of oil is determined in commodities markets, where companies and traders buy and sell the petroleum for purposes that can include refining it into gasoline or holding it as an investment. The markets, and the prices they set, are influenced by supply-and-demand factors, such as trouble in the Middle East that could result in less oil coming from that region of the world.
After oil, 14 percent of the price of a gallon of gas comes from taxes, including a federal gasoline tax of 18.4 cents a gallon and state and local taxes. Then, 15 percent goes toward costs associated with refining, moving and selling the gasoline.
For more on how to break down the price of gasoline, go to Bankrate.com. I’m Doug Whiteman.