Price of oil dropping, price of gas increasing: Why gas should cost $2.72 a gallon.

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Today, UCAN's survey of San Diego County gas prices showed an average price of $3.2875 a gallon, down less than fifteen one hundredths of a penny since last Tuesday. What's especially troubling is that last year on this day, gasoline in San Diego County averaged just $2.89 a gallon.

Meanwhile, the price of oil on this day last year was $68.74 a barrel, while today it is selling for less than $62 a barrel.

When the price of oil goes down, and the price of gasoline goes up, it means that the laws of supply and demand are out of joint. Instead, what California has is "Demand and Supply," where the oil companies supply less refined fuel and demand more money for it.

If gasoline prices were tied to the price of oil, San Diego's gasoline should cost $2.72 a gallon, or 17¢ a gallon less than what it cost last year.

Here's the math:

1) A refinery can extract 42 gallons of gasoline from one barrel of oil.

2) At last year's oil price of $68.74 a barrel, the cost of the oil in a gallon of gasoline was equal to $1.63

3) Today, oil is selling at $61.51 a barrel, so the cost of the oil in a gallon of gasoline is equal to $1.46

4) Today, gasoline costs $3.28 a gallon, while last year, on this day the same gallon cost $2.89

5) Since our oil costs 17¢ less per gallon than it did last year, shouldn't our gasoline cost 17¢ less than it did last year?

By our reckoning, this would be a good question for a lawmaker to ask the oil companies. Although the way things go in Washington and Sacramento, it is likely that the only results we'll get out of our politicians is a lot of hot gas.

Filed Under
Gas & Autos Gas Prices - Oil Watch -

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It would be appropriate for those attending the RTA hearing in the EcoVillage to raise the question of possible savings from converting RTA’s fleet of 650 buses, or a portion of the fleet, to allow the use of biodiesel fuel.

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