There are two sides to the Saudi Arabian oil story. One that’s based on the next steps in the growing middle east tension highlighted by Iran’s provocation against foreign oil tankers and their likely role in aiding the Saudi Arabian attack and gas prices. Now, I don’t think there’s any question about the biggest side of this story. Iranian provocation has rapidly been growing but hey, there’s nothing like the threat of rising gas prices to capture the news cycle. That’s fine and all provided it’s an accurate depiction of what’s to come. The problem is news media is generally led around by marketing efforts from groups like AAA, rather than a hard, credible analysis that’s not being driven by marketing primarily. With that being said, here’s what the real deal impact is pacing at the pump based on market conditions as of yesterday’s activity in the energy markets.
First, you’ve got to realize what the price at the pump is based on. The most recent breakdown is like this:
- 53% - oil
- 21% - taxes
- 18% - transportation and retail margin
- 8% - refining
You’ll notice that only about half of the cost has to do with oil and the next highest expense is the tax. A tax that’s paid at the federal, state and local level. This is one area where taxes are much higher than average in Florida, especially South Florida. It's 60.4 cents per gallon to the local, state and federal government.
That’s the immovable object. So, with that being the case the average price in Florida is currently $2.38 per gallon. With oil prices rising just under 14% yesterday and oil being 53% of the price, we’re talking about an increase of about 18 cents per gallon in ten to 14 days if these conditions hold when gas stations take future delivery. Therefore, we can expect prices to rise to $2.56 or so on average over the next two weeks.
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