As many of you know, the petroleum and refined gasoline industry is an international and complex market. There are many factors that contribute to the production of refined gasoline, and such an extensive process can leave unanswered questions for the end user.
These questions may involve aspects including the cost distribution of a gallon of gas, the kinds of taxes are applied, and the percentage of the gas price which is made up of tax. A closer look into these contributing factors can provide insight on where the money you spend at the pump ends up going.
According to independent statistics and analysis from the U.S. Energy Information Administration the price of a gallon of regular gasoline is broken down into ‘four main components’ that include everything from the cost of crude oil to retail marketing expenses and taxes.
At the end of 2013, eia.gov stated that 71% of the cost for a gallon of regular gas is derived from the cost of crude oil, 13% of the total cost is state and federal tax, 11% is from distribution and retailer costs, and 5% is from refining costs and profits.
Gasoline is also subject to a fuel tax in the United States, the tax is applied at both the state and federal level. State taxes, however, are variable and determined by the state itself. The Institute on Taxation and Economic Policy informs us that most ‘states levy taxes based on a percentage of the sales price’ while other states, like Florida, base their tax rate on the consumer price index.
In Maryland, the excise tax is 23.5 cents per gallon, ranking as the 29th lowest tax rate in the U.S. and the District follows this tax rate, matching Maryland’s national rank of 29th.
Gasoline is an everyday commodity that faces high price sensitivity, yet understanding the costs that go into a gallon of fuel is challenging for most individuals. Hopefully this information provides insight as to what you really pay for at the pump.