Domestic Crude Oil Peaked at $145 a Barrel in 2008. It Closed Yesterday at $118.50. So Why Is Gas at the Pump at All-Time Highs?…

by Pam Martens and Russ Martens at Wall Street on Parade

The owner of Schlafer’s Auto Body & Repair in Mendocino, California has made headlines at CNN, the Los Angeles Times, and across local TV affiliates in the past few days – and not in a good way. Schlafer’s is home to an independent Chevron gas station and, as of this weekend, it was charging the highest price for a gallon of regular gas in the nation: $9.60. As of this morning, the average price for a gallon of regular gas in California is $6.37, according to AAA’s gas price tracker. AAA reports that the national average for a gallon of regular gas across the U.S. this morning is $4.91.

California is far from the only state where complaints of outrageous price gouging are being heard. The Daily Record of Maryland reported yesterday that a Shell station in Bowie, Maryland was charging $6.13 for a gallon of regular gas while an Exxon gas station “less than a block away, was charging just over $5 per gallon.” Most gas stations in the U.S. are independently owned and not operated by a major oil company.

The peculiar thing about the current era of gas pump prices hitting historic price levels is that the cost of crude makes up 61 percent of the cost of a gallon of gasoline, according to the Energy Information Administration (EIA). And U.S. domestic crude, known as West Texas Intermediate (WTI), is not at historic levels. WTI surged to $145.16 per barrel at its peak on July 14, 2008 and hasn’t traded near that level this year. So why are gasoline prices at the pump at historic levels?

Part of that, as the above stories illustrate, is just plain ole price gouging. But the big picture is more complicated than that. According to the EIA, in addition to the 61 percent of the price of a gallon of gas that comes from the cost of crude oil, the other 39 percent shakes out as follows: the costs of refinement (14 percent), distribution and marketing (11 percent), and taxes (14 percent).

And refining looks to be a particular problem right now. The EIA reports that as of January 1, 1982, the U.S. had 301 refineries in operation. That compares to just 129 in operation as of January 1, 2021…