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Gas Prices - Where the Money Goes

As the price for a barrel of oil topped $110, many people begin to wonder who is making all the money? The national average price of gas reached $3.27 prompting CNN to outline the current breakdown of where those dollars and cents go. The basic chain includes federal/state taxes, gas stations, transportation companies, storage companies, refineries, crude pumping companies and well owners. Hold your wrath from pump attendants. Perhaps obvious, most of the money goes to taxes, pumping outfits and the well owner. The influence of market traders is smaller than expected as their profits come from arbitrage, both up and down, as opposed to direct ownership of shares.

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I find it amusing how there are so many complaints about gas prices going up for the Easter holidays. The implication is that the oil companies or gas station owners are heartlessly exploiting the consumer need to use their cars for recreation over the break.

It is not that at all. It is simply the way markets work. Extra demand with fixed supply (in the time available) translates to higher prices. The only way to mitigate this effect is to increase competition, but that is not possible in the time available either.

It is no use examining costs as if they relate to prices. Prices are set at what the market will bear, and at Easter it will bear higher prices.

The money is going to those who benefit most from the gap between the steadily increasing bulk price and the rocketing retail price – the distributors.

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