Interesting insight from the US Energy Information Administration.

The national average retail price of a gallon of regular gasoline in January 2012 was $3.38. The four main components of the retail price of a gallon of gasoline, and their approximate share of the total price in January are:

  1. Crude Oil: 76%. The cost of crude oil as a share of the retail price varies over time and among regions of the country. Refiners paid an average of about $108.00 per barrel of crude oil, or about $2.57 per gallon, in January 2012.
  2. Refining Costs and Profits: 6%
  3. Distribution, Marketing, and Retail Costs and Profits: 6%
  4. Taxes: 12%. Federal excise taxes were 18.4 cents per gallon and State excise taxes averaged 22.68 cents per gallon.

Banks, hedge funds, commodity trading advisors, and other money managers-who often do not have interests in trading physical oil-are also active in the market for energy derivatives to try to profit from changes in prices. In recent years, investors have also shown interest in adding energy and other commodities as alternatives to equity and bond investments to diversify their portfolios or to hedge inflation risks. This chart below shows the quarterly average of the number of outstanding oil futures contracts at the end of each NYMEX trading day. Trading in oil futures increased substantially from 2003-2007 as interest in oil as an investment grew, which is the new driver in our mind of gasoline prices.