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Are the Gas Prices Going Up Because of Taxes?

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I saw an interesting graphic in the newspaper the other day. It showed how the price of gas was broken down. Most of the cost was constituted by the crude oil itself, and the rest of the cost was split up between expenses like refining, distribution, marketing, and taxes. But, since I really didn’t know what the historical percentages were on the price of gasoline, it lead me to wonder, “Are the gas prices going up because of taxes?

gas prices explainedWhere I currently live, the average price of a gallon of gas is about $3.25. Utilizing the graphic on the right, I would estimate that the crude oil actually costs $2.31 per gallon (71% of $3.25), and the rest of the expense is allocated as follows:

  • Refining: $0.16
  • Distribution and Marketing: $0.33
  • Taxes: $0.45

So these are the numbers for 2011, but what about the past years? What were the typical rates? According to the U.S. Energy Information Administration, taxes were actually higher during the Bush years (2000-2008) than they are now. The federal tax on gasoline used to be 23%! So, the tax rate has actually dropped by 9% within the last couple years. Unfortunately, with the crude oil prices on the rise, we have not really seen a break at the pump.

With the new innovation in electric cars, do you expect that the goverment will begin to tax the electricity that we use to charge our cars? If they do not, they will most likely need to increase the tax percent on gasoline in the near future.

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AUTHOR Derek

My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.

12 Comments

  1. In our state, I think government already has taxes on the utility bill.

    • Yeah, the government is crafty that way! They’ll figure out how to get more tax dollars. 🙂

  2. Those gas tax levels look awfully good compared to what we pay up here in Canada. I don’t remember the exact levels, but I remember looking at a pie chart and I think the amount of tax was a much bigger percentage than that!

    • Yikes! I’ve been to Canada a few times, and it was always tough to figure out if the gas was actually more expensive. Us silly Americans measure our gas in gallons…

  3. The price stations pay can change up until they pump it into the tankers at the depot? And every day the price does change – today it’s .0305 lower than yesterday per gallon from the depot where I am. If they can get there before it changes again. It used to be a daily price midnight to midnight, now even that’s changed. That’s why you see the prices changing at the stations all the time. It’s a numbers game to make those few cents a gallon profit and cover all the costs.

    • That’s true. The price of gas is constantly changing. I remember my mom would watch the gas prices by a station at our house. If the price went up, she knew where she could go to get it at the cheap price the day before (they were a little slower at raising their prices). I used to play this game too, but the prices just change so much, it makes it impossible. I know which stations are typically cheaper, and those are the ones I stick to in order to fill up my ride.

  4. I heard on the radio the other day that they are looking to raise the gas tax 10 cents per gallon. I’m not sure if that is just in my state, or a nationwide thing, but that’d drive up my fill up price an additional $1.20 each time I fill up, and if I fill up every 5 days or so (lots of stop and go traffic for me) and if gas prices stay steady (yeah right!) then that is almost an additional $90 a year! Doesn’t sound like much, but if it keeps going up from there… who knows where it’ll stop!

    I am seriously contemplating an electric vehicle, but right now they are still too expensive for my pocket book!

    • Yikes! I figured the tax on gas would increase again, but not so soon! Hopefully this is just rumors. The price of gas is already high enough.

  5. One good thing that came out of high gas prices was the end of obscenely large vehicles that could last only upto the drive to the next gas station!

    • Haha! I remember the huge Blazer my friend used to drive. I think it got about 7 miles per gallon or something!

  6. The government will start to tax per mile so it doesn’t matter if you use electricity or gas.
    If I was in charge, I would increase gas tax to at least $2. This will create an incentive for people to buy smaller vehicles and use less gas.

    • $2 tax huh? Ha, I imagine you wouldn’t be too popular! I understand your point, but I think people are starting to drive more appropriate vehicles. The monstrocities aren’t selling as quickly these days.


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