A ship was hijacked, “Sirius Star with its full cargo of two million barrels of oil” from here
That got me thinking, how much gas is in each barrel of oil. Turns out a barrel is 42 US gallons and about 19.5 gallons of gas can be made from one barrel. [source ]
The Price of Oil today is about $54, which means the gas component of that is
(19.5/42)*54 = $25.07 or $25.07/19.5 = $1.26 / gallon raw price
I found this Gas Price Breakdown
14% Dist and marketing
15% Refining Costs and Profits
27% Taxes
44% Crude Oil
So, at today’s oil prices, gas should be,
$1.26/ 44% = $2.92 Expected Gas Price
This news story implies that crude oil is 54% of price,
$1.26/ 54% = $2.32 Expected Gas Price
So at today’s prices ($1.85), gas is a real bargain that cannot last unless crude drops to about a dollar a gallon or $42. So will gas go up or will oil go down? I’d bet on oil going down.
[UPDATE] Using EIA data for gas and oil going back to 1990, the median cost component of oil on a gallen of gas is 46%. Charting the variance from median shows that the price relationship holds but has alot of noise (yellow line). If the variance is below 100, gas is cheaper than it should be, if its above, it’s more expensive than it should be historically.
Click for bigger image.
