Relation Between Gas and Oil?

Question

It might sound like a stupid question but I really don't know. So does oil produce gas therefore if oil prices raise then gas prices follow? What's the story?

Answer 1

Further complicating the equation is that rising prices for petroleum are somewhat delayed, because it may take up to three months from the point of getting it out of the ground to the point of putting refined gasoline in a tank.  the futures market takes care of this lag to some degree.  Prices may rise in anticipation of petroleum being higher by the time it gets to retail level, but it may be slower to decrease because the retailers are afraid of getting "whipsawed", by reducing their prices prematurely, then having to raise them again immediately.

Answer 2

There are 42/gals in 1 Barrel of Oil. You can extract about 21.5/gals of Gasoline from Oil. This means, that if Oil costs $140/barrel, by default, gasoline will cost $3.33/gallon the moment it is refined. Throw in some taxes, transportation costs, a few nickels of profit for the refinery, gas company, and gas station, and you get $4/gas pretty quick.