Crude oil and gasoline price analysis

This morning, crude oil futures for August delivery hit $76.59 a barrel. Demand is high, supplies are dropping, and geopolitical risk is causing great concern on the world markets.

A barrel of oil contains 42 gallons. This is refined into a variety of products - diesel, tar, heating oil, and gasoline to name a few. Different types of crude oil yield different amounts of gasoline. This website states that an average of 19.2 gallons of gasoline come from each barrel of oil once processed. August delivery crude oil at it's peak was $1.82 a gallon. Unleaded gasoline for August delivery hit a high of $2.30 a gallon, a $0.48 a gallon or 26% premium over crude. In California, excise taxes are 18.4 cents a gallon, plus the federal excise tax of 18 cents, plus sales taxes of 8.25%.

Looking at the current cash price instead of august delivery, gasoline is $2.2059. Add taxes, and the current cash minimum price for unleaded gasoline is $2.752. Yesterday, I paid $3.55 a gallon for premium unleaded - which typically has a $0.20 a gallon kick above regular unleaded. If regular gas is $3.35 a gallon, this means that the premium taken to distribute gasoline to consumers is about $0.60 a gallon, or 22%. The current cash price for crude oil is $1.785 a gallon.

A current breakdown of gasoline pricing is as follows:

Crude oil: $1.758 a gallon
Processed to unleaded gasoline: $2.2059 a gallon, $0.4479 or 25.5% increase
Distributed to consumers, before taxes: $2.758, $0.5521 or 25% increase
Government taxes: $0.592 or 21.5% increase
Final price to consumers: $3.35

If this trend is followed and current prices stay level, regular unleaded gasoline in August will be $3.49 a gallon at my local service station.

The current national average price is $2.961 a gallon. In August, I estimate that it will be $3.08 a gallon - beating the inflation adjusted record high of $3.06 a gallon set in March of 1981.