When oil was 140 dollars per barrel we paid over 4 dollars a gallon for gas but now oil is 70 dollars per barrel so why do we pay almost 3 dollars per gallon instead of 2 dollars?

Answer 1

The price of gasonline is more than just what is paid for the oil extracted from the ground. That gasoline price also includes refining, shipping, and sale (like the people who work at gas stations). From December to June 2009, gasoline prices went from about $1.50 to $2.50, while oil went from $30/barrel to $70/barrel. That translates, very roughly, to a $1 increase per gallon of gasoline for every $40 per barrel of oil. That would mean that if oil sold for $0, gasoline would still cost about $.75 a gallon. Keep in mind, the $1 gasoline for $40 of oil is a very unscientific method. Yet it is somewhat consistent. At July of last year, oil was $147, and gasoline costed on average $4.12, I think. That means the cost of oil then was about $80 more than it is right now. That translates to an extra $2/gallon for gasoline. Add those two dollars to the current price of $2.50/gallon, and you end up with an estimated $4.50- not a far cry from the actual $4.12.