Explainer

From oil to the pump

What's in a gallon

The U.S. Energy Information Administration breaks the pump price into four parts: the cost of crude oil, taxes, refining costs and profits, and distribution and marketing. Crude is usually the biggest piece.

Gas taxes are set in cents per gallon, not as a percentage. So when crude climbs, the tax part of the price stays put while the rest moves.

The barrel math

A barrel holds 42 gallons. So every $1 change in the price of a barrel works out to about 2.4 cents a gallon ($1 ÷ 42). That's the crude cost alone, before refining or taxes.

Worked example (made-up prices, not a forecast): say crude goes from $80 to $90 a barrel in a week. That $10 rise, spread over 42 gallons, is about 24 cents a gallon in crude cost. Whether it reaches the pump, when, and how much of it depends on the other parts of the price.

Why the pump doesn't move the same day

Gasoline is made from crude that was bought earlier, moved by pipeline and truck, and sold by stations that set their own prices. Refining margins change with the season and with refinery outages. Diesel and gasoline from the same barrel can move differently. Crude sets the direction over time, but the other parts of the price can speed it up, slow it down or push the other way for a while.

From the pump to inflation

Gas is part of the Consumer Price Index, so a big run in crude shows up in inflation, and it hits headline inflation much harder than core. See headline vs core inflation, and work out your own bill with the gas-cost calculator.

Get the real numbers

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Future Macro is education, not financial advice.