Process of gas pricing complex
5/12/2008 12:10 AM   0 comments on this story E-mail this story to a friend

By MIKE GELLATLY
Staff writer
It has taken over from the weather as the first topic for small talk and leapfrogged the general election preamble to the top of television news.
Gasoline prices have been rising sharply in recent months and years.
Whether the problem is caused by dependency on others, a weak dollar or simply the rampant consumption of a finite product, pump prices for a gallon have exploded.
So why does gas cost what it does?
Though companies like Exxon make profits that make Bill Gates blush, the process is long and extremely expensive.
The oil first must be found, and it is rarely as easy as Jed Clampett made it look at the start of his TV show.
Firstly, an oil "play" has to be found. According to British Petroleum's website, a play is a group of geographical features that have a high probability of containing oil or gas when found together.
This combination of bulges in the ground or seabed and a combination of porous and non-porous rock are located (although nothing is certain until they are drilled and extraction starts) and analyzed by geologists using a variety of tools.
These include seismic surveys, analysis of geological features on the surface and gravity and magnetic analyses. Other tools include exploring drills and even smell sensors specifically tuned to detect oil.
One such device, according to Columbia University, is a thumper truck that sends vibrations through the ground to be measured on the way back up.
Once the oil is discovered, a well must be drilled and the crude oil retrieved. Most people have seen the Texas-style pump wells set against the desert, but 200 miles out in the Atlantic or North Sea, setting up an oil rig is not an easy business.
The oil that comes out of the ground must then be transported to a refinery.
Unfortunately, oil does not come out of the ground in gasoline or jet fuel form.
Gasoline is manufactured in a refinery, using heat, pressure and chemical reactions to transform crude oil into hundreds of products consumers need - gasoline, diesel, jet fuel, motor oil, greases and chemical feedstocks, according to the Department of Energy.
Refining begins by running the crude oil through a pipestill similar to a distillery.
Intense heat is used to vaporize most of the oil. As the vapors rise inside the tower, different compounds cool and separate. Heavier molecules rise a short distance, while lighter ones rise farther. As the various compounds condense to liquid form, they accumulate on collection trays at varying heights inside the tower. This process separates crude oil into its various components based upon the weights of their molecules.
What has caused gasoline prices to act like the lightest molecules of vaporized oil?
Crude oil: Light sweet crude oil is at an all-time high, listed at over $125 Friday. Ten years ago, in May 1998, a barrel of crude oil cost around $12 a barrel and made up just more than a third of the pump cost, according to the Energy Information Administration (EIA).
Jump to May 2008, and prices are 10 times that of a decade ago, and the price of oil is almost three-quarters of the total cost.
The demand
EIA estimates the world uses around 86 million barrels of oil each day, with the United States burning about a quarter of it. And, since 1980, demand for oil has outstripped supply and reserves have been tapped.
Organization of the Petroleum Exporting Countries (OPEC) members have named India and China's rapid increase in demand as a major reason for the recent impact on prices.
Where do gas prices go from here?
"Up" seems to be the consensus.
Analysts from around the world seem to differ on where they see the ceiling for cost setting itself.
Goldman Sachs analysts suggested last week that oil prices are increasingly likely to hit between $150 and $200 a barrel within the next six to 24 months.
OPEC's research director Hasan Qabazard predicts that world oil demand will increase about 30 percent to 118 million barrels a day by 2030.

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