How do I interpret price of oil per barrel?

Question

Oil just hit $85/barrel on the market. What can I multiple that buy to approximate the retail price of a gallon of gas in the US? Thanks.

Answer 1

There is really only a weak connection at best.  The price of gas is based on a number of factors.  The demand for gas at that particular time would have a much larger effect on the price of gas than the cost of crude oil.

Answer 2

Here is an excellent website to understand gasoline prices.  It's put out by the Energy Information Administration of the Department of Energy.  It breaks down the cost of gasoline.

Briefly, gasoline's cost is only about 50% related to the cost of crude oil.  The remainder is taxes, distribution, marketing and refining.  They all combine to affect the street price we pay.  That's why when oil prices go up, gasoline doesn't go up as much.

Also, crude oil is 30 days from the gasoline in your station.  Between refining time, transportation time and other factors, what crude was worth when it came out of the ground is irrelevant to worth when it's delivered to your station.  The futures market and spot markets are what really drive gasoline costs.  What the spot market is getting is the ultimate driver of cost.

Hope the website helps !