Here in the United States the cost of gasoline is roughly three dollars. That seems quite outrageous to most people that will freely share their opinion on the expensive liquid.

On the other hand, I think that oil is cheap. Even if crude did close at a new record high of $75.15 per barrel, I think it is still quite cheap. I don’t like spending $35 to fill up when I used to be able to do it for $20, but when you look at the amount of work required to get the gas from the ground or ocean floor and into my car, it certainly seems like I’m getting a heck of a deal.

Consider some of the other liquids that we buy such as milk and bottled water.
With bottled water the work involved is simply turning on a faucet and filling up the bottle. Ta-da, bottled water that can be sold at more than three dollars a gallon! Next we’ll look at milk. In order to get this it’s simply a matter of having some cows and then milking them. Okay so then you have to homogenize the milk and separate out the fat, but after that you’re good to go. Milk sells for roughly three dollars a gallon.

Now let’s take a look at getting gasoline from the ground and into your car. First, you have to find an oilfield that you can tap. You have to hire all kinds of engineers for this, particularly petroleum engineers and environmental engineers. All kinds of restrictions apply on where you can drill, how much you can take, and how the land is treated. All of these concerns can be big sinkholes for the investment.

Now that we have found some oil, or at least we think we have, it’s time to drill down to it. So we throw in tens of thousands of dollars getting the required machinery out to the field and getting the pump drilled, primed, and otherwise fired up.

So now it’s a week later and we’ve got a giant holding tank full of piping hot crude oil, so now what? Now we have to get it to a refinery. This could mean a whole fleet of oil tankers, semi trucks, railroad cars, or perhaps it could be a pipeline to get the black gold often hundreds of miles away.

There haven’t been any new refineries opened up in America since 1976, making us more and more dependant on foreign oil. We have essentially been running the ones we do have full time to maximum capacity ever since.

Then at the refinery plant, there are all kinds of other products being produced besides just gasoline. Things like gas flares and air pollution. A premium is paid to offset some of the environmental impacts of that. And there are valuable things produced as well such as diesel, propane, asphalt, and plastic. As you can imagine, these other things are competing for the crude oil, driving prices up.

Finally we’ve got a large vat of gasoline resembling only a fraction of it’s original size. Time to put it into your car? Not yet, we still have to get it to your car. So it could be loaded back onto the train and to a distributor, or perhaps on the semi trucks to the distributor. Regardless, it’s got hundreds if not thousands of miles to go to get to you.

A share of the revenue must be set aside for the drill site’s takedown once it runs out of the crude. The machines all along the line must be kept in good condition, with possibly fatal results if they are not.

Then after all of this, you can fill up your tank for three bucks a gallon.

Consider that from 5 years ago we have twice as many oil rigs, and yet we are pulling up the same amount of oil. If oil ran out tomorrow, there would be a HUGE scramble for alternative energy, but until it does it’s not such a grand priority.

Now consider everything that happens from exploration to distribution. All the money and time spent throughout the process. It certainly seems to me like you’re getting a bargain for only $3.00 a gallon but why are people paying the same amount for water and milk?