Oil was a commodity, of which we were told, the world had a limited supply. That in but a few decades we would be running out, and leading up to that day, prices would soar. Oil was a commodity we were told the world was in limited supply. That in but a few decades we would be running out, and leading up to that day, prices would source. As oil steadily rose to over $100/ barrel in June of 2014, it became easy to accept, however unpleasant, that higher prices were going to be taking an ever-larger chunk out of our budgets. Then a strange thing happened, the price of a barrel of oil has plunged to $45. This is not a quick blimp, but oil executives believe it will be at least several years before oil returns to $90 or $100 a barrel.
Why is gas still so expensive? Why, with falling cost of oil, is Chicago still seeing gas prices that are near their record highs?
Chicago has the highest gas prices of any major metropolitan area in America.
As I travel to other cities and fill-up my tank, I can’t help but notice how much lower others are paying for the same gas. The cost we Chicagoans pay to fill our vehicles is based on the global market price of oil, the cost of refining, and the added taxes. It is the combination of these factors that create that create the inflated cost.
The price of oil is, and should be, the largest factor influencing the price of gas, however it is far from the sole element effecting the price you pay at the pump. We do not fill our cars up with crude oil, gasoline is a product produced in refinery by breaking down and separating oil into components according to their boiling point and density. The lightest fractions, which includes gasoline, vaporize and rise to the top of the refining tower, there the vapors are carried through pipes where they condense back to liquids. The resulting gasoline then undergoes additional processing before being pumped into tankers for delivery. The cost of refining is not directly tied to the price of oil; so it should remain rather level. Chicago does not refine its own gasoline; therefore it should not be a reason that prices are higher here.
The amount of tax charged per gallon of fuel is one of the principle reasons Chicago’s prices consistently among the most expensive in the country. There are several layers of taxes, the most common are the “motor fuel taxes” these are based on a set cost per gallon. The revenues from These taxes were designed to cover the cost of maintaining roads, and related transportation expenses. The state of Illinois, Cook County and City of Chicago all have roads to build and maintain and these expenses, by way of taxes, are passed on to motorists. no different than any other state. In addition to set per gallon taxes, On top of that, additional excise taxes are charged by Illinois, the county and of course Chicago. The amount of these taxes vary from state to state, with Illinois coming in at number five. Illinois is one of the few states that additionally tacks on sales tax charged as a percentage of the total cost of your purchase. As a result as gas prices rise, so does the tax.
This all goes to explain why fuel prices are high here, but with the price of oil tumbling, Why is gas still so expensive? When crude oil moves upward we quickly see escalating numbers showing up on signs, but when the reverse is true, our cost at the pump seems to barely budge.
It will be interesting to see if lower prices begain to show up at Chicago area pumps?
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