The price of gas is only partially due to the cost of oil. Taxes make up a pretty chunk of the cost of gas. On average $0.50/gal.[1]. Don't forget the cost of refining and transportation. This chart says 62% of the cost of gallon is due to crude oil costs[2]
So based on your $3.60/gal, $2.23/gal is oil. Reduce that by 40%, you get $1.33 and add back in the other stuff and I get $2.70/gal now.
Because fuel taxes are supposed to be an approximation of how many miles you drive, aka how much wear and tear you put on the road infrastructure.
You put the same wear and tear on the road at $1/gal vs. $4/gal. Trying to create budgets against a commodity that rapidly changes prices as much as gas/diesel does would be rather difficult.
For example, in 2015 we'd be forecasting huge budget shortfalls for any planned road maintenance due to the unforseen huge drop in gas prices.
Even if this is true, the business owners' argument to Congress would be that the consumer will pay for it either way; businesses that depend on transportation would just raise prices to compensate.
I believe that it should the cost to repair roads should be the responsibility of those who cause the damage. Yes, this would raise cost of goods shipped via truck. If you're ordering things that need to be shipped via truck, you should be responsible for that damage.
Why should I be taxed to fix road damage based on a metric that doesn't begin to accurately reflect my actual contribution to the problem?
Additionally, if the trucking industry had to raise rates due to a higher 'road maintenance tax' this may also make more efficient forms of transportation more popular, ie trains.
I am not opposed to the tax, I simply think it's pointless to talk about what it's "for". That's what I meant to convey with the second line. It's a tax. If you don't pay this one, you'll pay another. And the government will spend the money where/how it sees fit.
Fuel taxes are typically allocated towards road construction and maintenance. Fuel use is roughly proportional to road use, so it's roughly a tax that makes road users pay for their portion of road use.
The fact that more fuel-efficient drivers pay less taxes is a bonus, since fuel use has negative externalities.
Not all of the price of gasoline is derived from the price of crude oil. Some of the price is from taxes, transportation and refinery costs which have not changed. (The exact ratios vary depending on where you live).
But as someone said, crude oil prices reflect future retail prices. When you go to a gas station you get fuel that is weeks/months old, so it makes sense to pay the price that crude oil was selling at weeks/months ago.
Great point. 40% drop in oil prices vs. a 22% drop in gas prices. Bottom line is that gas distributors don't have to precisely reflect the drop in oil prices at the pump because they can make more money that way.
There's also the fact that the oil prices generally reflect future prices. Gas stations need the physically delivered commodity. There's some small fluctuations there.
I don't have a deep understanding of how gas stations work, if anyone else has insights would love to hear them.
> Bottom line is that gas distributors don't have to precisely reflect the drop in oil prices at the pump because they can make more money that way.
This is a gross simplification. I'm not an expert or someone with a deep understanding of how gas stations work, but even I understand that a barrel of crude requires a complex process to turn it into gasoline and even more logistics to get it to the pump. Every one of the people in that process needs to be paid, including your friendly neighborhood gas station cashier.
This line of thinking is the equivalent to wondering why the price of a new car hasn't decreased if steel prices hypothetically dropped. Most products cost much more than their raw materials because to change them from raw materials to products and to put that product on a shelf requires the hard work of many people.
The price of gas is only partially due to the cost of oil. Taxes make up a pretty chunk of the cost of gas. On average $0.50/gal.[1]. Don't forget the cost of refining and transportation. This chart says 62% of the cost of gallon is due to crude oil costs[2]
So based on your $3.60/gal, $2.23/gal is oil. Reduce that by 40%, you get $1.33 and add back in the other stuff and I get $2.70/gal now.
Not far off huh?
[1]http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States [2] http://www.eia.gov/petroleum/gasdiesel/