The Iron Law of Gas Prices

Price of Gas  =  (World Price of Oil)  +  $1.00/gal

The price of gasoline (in 2012 dollars) has been $1.00 more(1)The $1.00 value is just a lucky coincidence. It covers the cost of refining, delivery and taxes. Three or four years from now, after about 10% more inflation, this will be $1.10 or so. per gallon than the price of oil for the last 25 years (see graph below). There were some small deviations, but nothing systematic. There’s nothing we can do about this unless we change the world oil price(2)The US price or the World price of oil? This graph uses the world price of oil which is best represented by the Brent (North Sea) price of Oil. — or we subsidize gasoline like Iran and Venezuela.

       The Iron Law of Gas Prices (click to enlarge)
gas price oil prices graph

 


References   [ + ]

1. The $1.00 value is just a lucky coincidence. It covers the cost of refining, delivery and taxes. Three or four years from now, after about 10% more inflation, this will be $1.10 or so.
2. The US price or the World price of oil? This graph uses the world price of oil which is best represented by the Brent (North Sea) price of Oil.