Essay on The Price of Gasoline

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The Price of Gasoline

What you are paying for when you buy a gallon of gasoline? Most people complain about the high cost of gasoline, but few understand how the price is calculated. Many people think this cost is for gasoline only, but many other factors determine what you pay at the pumps.
Gasoline is a mixture of the lighter liquid hydrocarbons, and used chiefly as a fuel for internal-combustion engines “Microsoft Encarta,” 2005). Crude oil accounts for nearly 17 percent of the energy consumed in the United States. Gasoline is one of the main products developed from crude oil in the United States. The primary use for gasoline is in automobiles and light trucks. Fuel produced all year round, and is delivered from oil
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Competition in the local market is another reason why gasoline prices can be different. Consumers in isolated areas may have to choose between higher local prices and the inconvenience of driving some distance to a lower-priced choice. In addition, competitive differences can be significant between regions with only one, or a few gasoline suppliers versus regions with a large number of competitors in close proximity (“EIA Brochures”, 2004).
Supply disruptions, such as scheduled or unscheduled refinery maintenance, can slow or stops production of gasoline for a short time, which can prompt a bidding war for available supplies. Prices will remain high if the transportation system cannot support the flow of surplus from one region to another (“EIA Brochures”, 2004).
California consumes substantial amounts of gasoline – about 16 billion gallons per year. Crude oil, the primary component of gasoline, comes from within-state oil wells (42%), Alaska (22%), and foreign sources (36%). Nearly 90% of our gasoline is refined in state, but additional
quantities of gasoline and blending components are imported because refineries cannot keep with the growing demand. California is also isolated from other refining centers in the U.S. because the federal government as an air quality “non-attainment” area designates most of California. The gasoline in non-attainment areas must meet stringent air quality requirements to burn…

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