Cost of crude only part of cost of gas

I liked the letter (Fence Post, Aug. 17) by Tom Dillivan about the high cost of gasoline not being due to supply and demand. I must conclude he is correct in his math.

He calculates the price of crude oil has dropped by 20 percent in recent weeks while the price of gasoline has only gone down by 7 percent.

He claims somebody is pocketing 55 cents on every gallon of gasoline. Then he points a finger at the oil companies.

The only problem is that his math is correct only when one assumes the cost of gasoline has no other costs than the crude oil itself.

That is, there are no costs to pump the oil from underground, transport the oil to the refinery, refining costs, transportation costs to move the refined gasoline to the gas station and of course, no taxes on the fuel.

This further assumes that all costs for oil exploration, building crude oil production facilities, building pipelines, oil freighters, refineries have been recaptured and are not added to the price of the fuel.

I am a retiree who had been associated with the oil industry while in the work force. My best estimate is, when crude oil costs $140 a barrel, the cost of crude is about 75 percent of the cost of a gallon of gasoline selling at $4 per gallon.

Taxes alone in Cook County are about 70.7 cents per gallon of gas. That is 57.9 cents to the federal and state governments plus 12.8 cents in county and local tax.

Oil company profits are about 7 percent of net income. This is about half compared to the profit of 15 percent earned by a company such as Wal-Mart.

To solve our energy problems, we must embark on an integrated program on many fronts.

These include conservation, increasing crude oil production (drilling) as well as developing alternative energy sources, which become more feasible due to the high cost of oil. Alternatives are nuclear, wind, solar as well as clean coal and oil from shale.

And there are politicians who want to help our energy problems with a windfall profits tax on oil companies. Let's get serious.

C. E. Glomski

Elk Grove Village