Why is it when a barrel of oil increases, say $1/bbl@42gal/bbl, it translates to .25/gal. at the pump?

Question

it makes absolutely no sence that the price per gallon of gas should increase more that the same price increase in oil, the only apparent change is about 2.5 cents/gal. the boat does not hold any more or less oil, its not making a special trip ro get it, the refineries are already operating, the workers have al been hired and trained, the gas stations are all still right where they where the truck drivers are still deliveringthe same as when they were 24 hour ago when oil was 2.5 cents/ gallon cheaper, they way i understand it is, 1. there is 42 gal. U.S. per barrel. 2. they manage to refine about 28 gallons af gas per barrel of oil. as far as i know the only part of the proccess that has any physical change is that at $100/ barrel an increas of $1/ barrel equates to only 2.1 cents/barrel. today, 3/27, oil rose $5/barrel, which the news informed me that will add about .75 cents/gal at the pump. it only adds up to about .11 cents/gal. of crude. now ask about record profits

Answer 1

The price of crude and the price of gasoline don't march in linear lockstep.  Crude oil has a certain cost associated with extracting it from the earth, what the refining capabilities of that crude are (the lighter and sweeter,  the higher the gasoline yield) and transporting it to to some point.

Refined gasoline adds the cost of refining and distribution to the cost of crude oil.  Taxes increase as the price increases, demand for crude and gasoline are different, since refiners don't want finished gasoline and consumers don't want crude.  We currently have higher than normal crude supplies, which is about the only thing keeping crude from exceeding $110/barrel right now.

Refinery costs increase in the spring, every spring, as refineries shut down to perform annual maintenance.  Additionally, the weak dollar is making global commodities more expensive, as more liquid currencies can buy relatively more and are doing so.  Much of the recent increase is driven by instability in the markets and the state of the US economy.

We are switching supply to Canadian oil sands, which are more expensive to refine and will add to the overall cost of gasoline, though the upshot is a friendlier source of imported oil.  Canada and Mexico are 2 of the three largest sources, with Saudi Arabia being third, but Canada is far and away #1.  Small price to pay for a stable supply of oil in my humble opinion.

Also, with diesel costs increasing, the cost to deliver a load of gasoline to your local station is going up dramatically.  The trucking companies pass this cost along to the consumer, of course, which keeps costs rising.  You're also a bit high with your yield estimate, it's closer to 20 gallons/barrel of crude.

A nice website on gasoline costs:  http://www.eia.doe.gov/bookshelf/brochur...

Answer 2

A barrel of OIL contains 42 gallons of OIL, not 42 gallons of gas.