Seth's Info

I got some very good news today, my oncologist has confirmed that I’ll be able start my trial on May 8th. As of yesterday, it was looking likely that I wouldn’t be able to start till the end of May, but a woman in France did not qualify for the study and I got bumped back up. I went to bed last night thinking I would have to find another treatment option because of the delays associated with this trial, but it all seems to be working out. My esophagus is slowly healing, and I’m starting to be able to eat more and am feeling much better today than earlier in the week. Add to that the discovery of my missing iPod (under my lazyboy for the last week, Jenny found it) and the sky is looking particularly blue today!

Off to another topic that I’m sure is on everyone’s mind… the price of gas. I’ve been spending some time recently trying to understand what goes into the price of a gallon of gasoline, and why it’s so high. I’ve found that the answer just isn’t that simple. Some facts to consider

-- The United States consumes an average of 20 million barrels of oil per day (about 25% of world consumption) according to the Department of Energy. Of that, about 45 percent is used for motor gasoline.

-- The Unites States imports around 10 million barrels of oil per day, about half of which is from OPEC countries.

-- The leading exporter of oil to the US is Canada, followed by Mexico, Saudi Arabia, Venezuela, and Nigeria.

-- The US maintains a Strategic Petroleum Reserve of ~700 million barrels of crude oil in salt caverns in Texas and Louisiana.

-- There are ~ 170,000 retail gas stations in the United States

Other relevant petroleum statistics can be found here

I've broken down the cost of a $3.07 gallon of gas in California (as published at this website). Where does the money go?

1. $1.70 for the Cost of Crude Oil (~55%): Currently, over half of what you pay is for the crude oil from the ground. Current crude oil costs are over $70 per barrel (as high as they have ever been), and each barrel is equivalent to 42 US gallons. So at $70/barrel, the cost per gallon is $1.67 out of the ground.

2. $0.78 for Refinery Costs & Profit (~25%): Refineries process crude oil into a wide variety of petroleum products, including various grades of automotive gasoline. The US currently has approximately 150 operating oil refineries, most of which are in Texas, Louisiana, and California. Refining costs vary for different regions of the US, depending on the formulations required for those regions.

3. $0.58 for Federal & State Taxes (~19%): The current Federal excise tax on gasoline is 18.4 cents per gallon (since 1993). State taxes vary a good bit, and there are often multiple taxes involved, and taxes on taxes. Hawaii, California, and Nevada have the highest taxes, over 30 cents per gallon, and Alaska has the lowest, under 10 cents per gallon. Federal gas taxes are earmarked exclusively for Federal Highways and Mass Transit Projects.

4. Less than $0.10 for Distribution, Dealer Costs & Profit (< 1%): Typical profits for local gas stations are on the order of 1 to 20 cents per gallon, averaging around 10 cents per gallon. This includes all the cost associated with getting the gasoline to the station, marketing, maintenance etc. As of late, the data seems to indicate that local stations are clearing only single digit cents per gallon, often selling gas at breakeven prices, or even at a loss. In years past, this portion was closer to 10-12% in many of the analyses I found.

So why are prices so high? The easy answer is that worldwide Crude Oil prices are at record highs, but why is that the case? As a worldwide commodity, oil prices are determined by worldwide supply and demand, and are particularly sensitive to volatility (or perceived volatility) in the available supply (which is why tension and unrest in and around OPEC countries will drive prices up). Additionally, worldwide the demand for oil continues to increase (in the US and Asia and beyond). Lastly, the United States’ ability to produce refined petroleum is limited by our current infrastructure (we haven’t built a new refinery in 30 years, and have closed many more) – this is another way of saying that we are very dependent on foreign oil. In the end, the price of gas is determined by what US consumers are willing to pay at the pump.

Traditionally, Americans have proven to be quite insensitive to changes in gas prices, with only minor decreases in gas usage during periods of high gas prices. The reality is that, unlike many other consumer goods, we have no alternative to buying gas for the cars we currently own. Most of us drive just about everywhere we go and to do that we have little choice but to buy gasoline. In the meantime, the standard list of things you can do to reduce gas consumption should be considered (check your tire pressure, combine or eliminate trips in the car, carpool etc). A good list from AAA can be found here…

Most of the proposals coming out of the government in the last week to “do something about it” fail to address any of the supply/demand issues affecting the price of gas, and appear to be nothing more than election year ploys. One particularly sad example are the Bee County, Texas Commissioners who voted this week to have all citizens boycott the 3 Exxon stations in town, until prices drop to $1.30 per gallon (keep in mind that at current world market prices, crude oil costs close to $1.70 per gallon before its refined, shipped, taxed etc). These types of approaches are just downright foolish. I’ve seen several similar boycott strategies promoted in email chains, all of which are similarly flawed and wont work. See snopes.com for a good explanation of why this is so.

In any case, we’ll be spending lots of money driving down to Philly Saturday morning, and I’ll be in at Fox Chase on Monday and Wednesday getting lots of pre-trial tests done (C/T, blood, EKG, MUGA, port installation). It will feel very good to be moving on with my treatment (and not having to fill my days researching the economics of gas prices).

Take care and be well,
Seth