Skyrocketing gas prices: Where does all that money go?

SAN DIEGO (KUSI) – Gas prices continue to climb in San Diego. The average price is a little more than $4.20 per gallon, and prices could go even higher as we approach the busy Memorial Day holiday. But where does all that money go when we fill'er up? KUSI's Ed Lenderman gets to the bottom of it.

The current average of $4.20 per gallon is not even close to San Diego's all-time high of $4.64 per gallon, but it's only April. Over the years we've been told that environmentally friendly Californians pay a steep price for cleaner burning gasoline. So let's begin with the tax issue.

The California state excise tax on a gallon of gas is 35.3 cents. That's on top of the federal excise tax of 18.4 cents. Then there's the sales tax, calculated on the total, which amounts to a tax on a tax. So, if you're paying $4.20 per gallon, 65 cents is going to the government.

As for the overall breakdown of the cost of a gallon, the price for crude takes up the lion's share at 64 percent of the total price. Taxes account for 15 percent. Refining costs account for 16 percent. And retail the remaining 5 percent.

“The cost of the oil in a gallon of gas is $2.67,” says Charles Langley, a consumer advocate for consumer watchdog group Utility Consumers' Action Network.

If you're wondering why the average price of gas nationally is 33 cents below what San Diegans are paying, Langley says it's not so much about our air quality regulations, as it is the anti-competitive environment at the wholesale level.

“Chevron and Arco actually have supply trading contracts, and when one of them runs out of fuel they'll call the other one up and get some,” says Langley. “That's not a competitive environment. We just don't have enough competition at the refinery level. We've got plenty of refineries. In fact, they've been shutting refineries down because they're afraid they'll produce too much gasoline.”

The refinery issue is a particular thorn to Langley.

“Somebody's making a lot of money there, and that somebody is the refinery. This is the only business I know of where the wholesalers make more money than the retailer,” said Langley.

Then, of course, there are the speculators who've been driving up oil prices. That seems to have settled down recently, as crude is not seeing the spikes seen earlier. In fact, some analysts believe gas prices are close to peaking, and that we're not going to see the dreaded figure of $5 per gallon. Langley agrees, although he says if there's a major supply issue we could go beyond our all-time high of $4.64 per gallon, set in June of 2009.

Meanwhile there was a problem at three refineries in Texas on Tuesday. So, expect to see a little spike in gas prices.

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