Gasoline Options Explained

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Gasoline, Diesel and Crude Oil Prices

What Consumers Are Paying for at the Pump

The biggest single component of retail gasoline prices is the cost of the raw material used to produce the gasoline – crude oil. Recently, that price has ranged between $50 and $70 per barrel, depending on the type of crude oil purchased. With crude oil at these prices, a standard 42 gallon barrel translates to $1.19 to $1.67 per gallon at the pump. Excise taxes add another 49 cents a gallon on average nationwide.

There are additional costs to refine, transport, and sell gasoline at retail outlets. As of January 2020, crude oil costs accounted for 53 percent of what people are paying at the pump per the U.S. Energy Information Administration. Excise taxes averaged another 17 percent. That leaves 30 percent for the refiners, distributors, and retailers.

Gasoline Taxes by State

Gasoline Taxes: Combined local, state and federal (cents per gallon). Rates effective 07/01/2020

The federal gasoline tax is 18.4 cents per gallon, and state gasoline fees and taxes range from a low of about 14 cents per gallon in Alaska to as much as 61 cents per gallon in California and 59 cents per gallon in Pennsylvania. On average, taxes and fees currently make up approximately 17 percent of what consumer are paying at the pump.

The remaining 30 percent of the price is the cost to refine, transport and sell gasoline.

Gas Prices Explained

What are the main components of the retail price of gasoline?

  • The cost of crude oil
  • Refining costs and profits
  • Distribution and marketing costs, plus a reasonable profit margin
  • Local, state and federal taxes

What determines the cost of crude oil?

The cost of crude oil is the largest factor in the retail price of gasoline. The cost of crude oil as a share of the retail gasoline price varies over time and across regions of the country. U.S crude oil prices are determined by global fundamentals, including supply and demand, inventories, seasonality, financial market considerations and expectations.

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Taxes add to the price of gasoline

Federal, state, and local government taxes also contribute to the retail price of gasoline. The federal excise tax is 18.30¢ per gallon, and the federal Leaking Underground Storage Tank fee is 0.1¢ per gallon. As of January 1, 2020, state taxes and fees on gasoline averaged 28.31¢ per gallon. Sales taxes along with taxes applied by local and municipal governments also can have a significant impact on gasoline prices in some locations.

Refining costs and profits

Refining costs and profits vary seasonally and by region of the United States, partly because of the different gasoline formulations required to reduce air pollution in different parts of the country. The characteristics of the gasoline produced depend on the type of crude oil that is used and the types of processing technologies available at the refinery where it is produced. Gasoline prices are also affected by the cost of other ingredients that may be blended into the gasoline, such as ethanol. Increased demand for gasoline in the summer generally results in higher prices.

Distribution and marketing

Distribution, marketing, and retail dealer costs and profits are also included in the retail price of gasoline. Most gasoline is shipped from refineries by pipeline to terminals near consuming areas, where it may be blended with other products (such as ethanol) to meet local government and market specifications. Gasoline is delivered by tanker truck to individual gasoline stations.

Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase gasoline from refiners and marketers for resale to the public. The price at the pump also reflects local market conditions and factors, such as the desirability of the location and the marketing strategy of the owner.

The cost of doing business by individual dealers can vary greatly depending on where the dealer is located. These costs include wages and salaries, benefits, equipment, lease or rent payments, insurance, overhead, and state and local fees. Even retail stations next to each other can have different traffic patterns, rent, and sources of supply that affect their prices. The number and location of local competitors can also affect price.

4 Most Common Types of Fuel, and What You Should Know About Them

Updated May 1, 2020

Drive up to almost any gas pump in the United States and you will see three fuel options. What do these mean?

Most drivers choose the cheapest option or lowest grade fuel; however, others purchase the most expensive or highest grade because they assume it is best for their vehicle’s engine. If you are confused by the three buttons, don’t mistakenly pull up to the diesel pump because that’s confusing territory, too. Basic knowledge of fuel types and grades is useful for any driver and will help you make decisions that will improve the function of your car. Below are the types of fuels available today, their characteristics, and their common uses.

Types of Fuel for Cars

Gasoline

Gasoline is the most common automobile fuel and is used all over the world to power cars, motorcycles, scooters, boats, lawnmowers, and other machinery. It is a specialized fossil fuel made from petroleum, hence its nickname “petrol” in the U.K. It is also important to note that hydrocarbons in gasoline and carbon dioxide from producing it contributes to pollution and smog. Despite this, you can find a gas stations all over the place.

Gas is commonly available in three octane ratings or “grades.” Grades are denoted by the research octane number (RON) and AKI of a specific formula. Stickers or labels will inform drivers which pump releases each grade. 87 AKI is generally the lowest octane rating and cheapest option. Next is mid-grade with 88-90 AKI. Lastly, premium or high grade gasoline has an octane rating of 90-94 AKI.

The different grades of fuel don’t burn the same way. The less octane, or the lower the grade, the faster and stronger it burns when pressurized. SUVs and sports cars run better on plus or premium (higher octane) since their motors produce more fuel compression for better drivability. But most vehicles function just fine on the lowest and cheapest gasoline option. You won’t realize a better fuel economy if you opt for plus or premium gas for a car that recommends regular gas.

The following video gives you an idea of different grades and their usage:

Diesel Fuel

Diesel fuel is also made from petroleum but is refined using a different method than that used to create gasoline. Many large and industrial trucks use diesel fuel, as do transfer trucks and agricultural equipment. There are two types of diesel fuel, one specifically for automobiles and one for off-road vehicles.

A resurgence of diesel powered vehicles has taken place in the past few years because of the rising price of all fuels, including gasoline and diesel. Diesel powered cars typically get better gas mileage or fuel efficiency than gasoline powered vehicles. Also, some drivers feel that they get a better value for their money even if diesel is more expensive. Volkswagen is a well-known manufacturer of diesel cars. The next video will illustrate the difference between petrol and diesel engines:

Bio-diesel

Diesel fuel that is created using vegetable oils or animal fats is called bio-diesel. It can be made using soybean oil, lard, algae, and vegetable oils. Some inventive drivers have found ways to recycle used cooking oils into biodiesel that powers altered car engines. Watch the following video to learn more about biofuels:

Ethanol

Although ethanol is not widely used as a general automobile fuel, it is added to our common gasoline as an additive. Many car manufacturers are designing vehicles that can be powered by ethanol because it is a cost effective fuel made from renewable resources like corn and sugarcane. If you are in the market for an ethanol powered vehicle, there are a few car models that can run on 100 percent ethanol.

Most cars these days run on gasoline, but others are increasing in popularity, especially battery powered vehicles. Make sure that you are purchasing the correct type of fuel for your vehicle for peak performance.

And finally, those new drivers, who are still learning how to pump gas, will find the following guide useful:

Gasoline Disposal: AutoZone Store Policy Explained

Does AutoZone take old gas? No, AutoZone is not the place to go for gasoline disposal. It does, however, recycle oil. But, for gas, your best bet is to find a nearby, municipally-run waste disposal facility that takes gasoline.

Gasoline Disposal: AutoZone Store Policy

AutoZone does not offer gasoline disposal services. We reached out to several AutoZone store locations in various states — from Florida to California — and customer service representatives at each store confirmed that AutoZone does not recycle gas. It does, however, have other environmental responsibility measures in place. You can recycle motor oil and batteries at most AutoZone locations. Every AutoZone store accepts used batteries for recycling, and all stores except those in Alaska accept used motor oil for recycling.

How to Dispose of Old Gas

Safety precautions should be taken whenever handling gasoline because it is both flammable and toxic. Best practices for safely handling gasoline include always storing gasoline in a tightly-sealed, approved container; keeping it at room temperature; avoiding mixing it with other fuels, and keeping it away from heat or ignition sources. If you get gasoline on your skin or spill it elsewhere, be sure to wash the area right away — soapy water will remove gas from skin easily. Be sure not to smoke or use lighters or matches where gas has been spilled unless you’re sure it’s been entirely removed.

Many municipalities have hazardous waste disposal centers that accept old gasoline. A quick online search should help you find a nearby hazardous waste disposal center. Note that facilities often have limited hours of operation and may charge a small fee.

Another option is to contact your trash collection service. Waste Management, for example, can help you dispose of a number of hazardous household materials.

In Summary

AutoZone store locations are unable to recycle old gas. They do, however, recycle batteries and motor oil. For gasoline disposal, check with city or state authorities to see if there’s a hazardous waste disposal center near you.

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