Gasoline prices

Gas prices have increased lately, pretty much all over the world. And everyone is complaining, although to be honest everyone always complain when prices of anything rises, so that’s not indicative of anything. The prices in the US have jumped rapidly lately, getting plenty of press over there for the recent prices of $3 per gallon, or so.

Which is amusing, since the US gasoline prices are still among the lowest on the world, at the consumer level. But that’s Americans for you. Well, that’s everyone actually, since being annoyed when things go worse for you is natural, even if you’re still better than everyone else. Not that everyone agrees they’re better, since those prices aren’t there in a vacuum, but it sure feel that way to a person going to fill the car with gasoline.

So, given the rates of increase in those tables, I wondered how do the prices in Israel compare. And went to check it out.

Here in Israel gas prices have increased in about 18.8% since the beginning of the year. Currently at the gas station the price for 95 octane unleaded gas was according to the data by the Ministry of National Infrastructures (in ILS per liter):

01/02/2005    4.67
02/01/2005    4.98
03/01/2005    4.96
04/01/2005    5.24
05/01/2005    5.37
06/01/2005    5.11
07/01/2005    5.52
08/01/2005    5.55

These values pretty much fit my recollection of prices I paid, so no need to assume the government is lying. Not in this case anyway.

95 unleaded gasoline is what the Americans would refer to as Premium unleaded gas. That’s actually the most common kind here, and you don’t really see anything with lower octane level at the gas stations. The range that you can find in the stations basically only include 95, 96, 98 octane, and diesel.

The price, converted to USD per gallon (with one gallon being 3.7854 liters and an exchange rate (Banking rate) of 0.2216 from ILS to USD on august
1st, and 0.2321 on January second (historical rates from ), was roughly $4.655 per gallon in August, and roughly $4.1 per gallon in January.

The difference in USD then comes to about 13.5%, less than the 18.8% difference in ILS which we felt here, but still a nice climb I think. Not nearly the rate of the climb in the US for the same period, though, which according to information on the tables I showed above stands closer to 50% increase.

These prices here do not include a fixed service commission (the difference between the price you pay when you self-service at the gas station, and the price you pay when you have a station’s employee filling the tank for you). I’m ignoring it for the rest of the post as well. It’s about 0.11 ILS per liter (officially, according to the site, but in most stations the listed difference is 0.15 ILS per liter) .

Our Ministry of National Infrastructure’s website also provides explanations as to how the gas prices are determined. Both the price at the refineries, and how the final price at the station is derived from it (Pages are in Hebrew).

To summarize and roughly translate, the price has four components:

  1. A tax, of 2.20 ILS per liter. In the listed above August exchange rate, that would be about $1.845 per gallon. This is currently estimated as 35.4% of the gasoline price.

    Notice that this place just the tax at nearly the entire price of gasoline in the US at 2004.

  2. VAT. 17% these days. In the recent years it ranged between 17%-18%, so that’s practically static. This is estimated as 14.5% of gas price at the station.

  3. Gasoline publicity/advertisement expenses. This is apparently determined by an outside consultant to the ministry of treasury and infrastructure, who determines the “desired profitability for for the national economy in the gasoline publicity segment”. And it is updated every half year based on the movement in the publicity margins of “four countries in Europe” up to some ceiling. This is estimated as 10.4% of the gasoline price.

    Personally I’m not sure why they need to publicize gasoline, but nobody asked me. A part of this probably also goes to compensate gas stations for installing the self-service pumps, the website is not entirely clear on that.

  4. Refinery prices. The purpose is to get a price which is similar to the European one. The calculation is done on a monthly basis. Raw data for prices is taken from the Platts system.

    The basis is the average price on the first five of the last seven business days of the previous month in Europe. They want five business days, and it takes two to do the calculation. And no, I’m not sure why it takes two days to calculate the price, but that’s what the site says. The price used is the price for a one (metric?) Ton of gasoline, in USD.

    The exchange rate is the one on the first of the two calculation days, based not on the banking rate but the “high checks rate” (I’m again not sure exactly what’s the markup on this one, but would make a wild guess at the 4-5% range) of one of the local banks (Bank Leumi, if anyone cares). The stated reason for the use of this rate is “the need to take into account the costs of purchasing currency to finance the purchase of crude oil and derivatives”.

    The price is then multiplied by a density factor to convert it from ILS per ton to ILS per liter, about 0.75, and by other variables needed to compensate for volume changes due to temperature differences.

    And this base refinery price, plus insurance, leakage, inventory, etc, is estimated to be just 35.4% of the total consumer cost at the gas station.

And that’s how the gas prices are determined here. Now you know. I Can’t say it’s all that fascinating, but that’s the way it is.

On the one hand I feel annoyed at paying all those extra taxes, making gasoline so much more expensive here than on the US. But on the other hand, the rates here are still cheaper than in other places in the world. So I guess I shouldn’t complain too much. Plus, the fixed taxes as a part of the price do mean that the price is less sensitive to changes in crude oil prices, so they are kept more stable. Not to mention one of the biggest advantages of higher gasoline prices, keeping less people on the already over-crowded streets.

This post was precipitated by both a recent thread on the Interesting People list, and a conversation I had with a friend about gasoline prices.

3 Responses to “Gasoline prices”

  1. Pamela Day says:

    What does Ils per liter convert into USA gasoline prices. Please give me an example so I could figure the conversion if decided to drive Israel how to figure gasoline prices based upon US dollars per gallon.Thank You,
    Pamela

  2. Post author comments:

    Hi Pamela,

    First I want to mention that this post was from August 2005, so the prices changed both in Israel and the US. I don’t follow the US prices closely. And the last time I went to a gas station here in Israel the cost was an amusing 6.66 ILS per liter.

    Anyway, I suppose what you want to know is a quick way figure out how to get from the price you see on the pumps (ILS per liter) to a price you’re familiar with (USD per gallon) ? Plus, of course an estimate of what it is right now, so you can have an idea in advance of whether it’s even relevant for you to drive here?

    So, you see prices in ILS per liters, and want to figure a price in USD per gallon. As a quick answer, with the current exchange rates the prices are nearly identical, and the price in dollars will be just a little more what you see on the pumps (Currently with 6.66 ILS per liter, it’s about 7 USD per gallon).

    As I wrote a gallon is ~3.7854 liters, so we start by multiplying the price by that much to get the price in ILS per gallon.
    The current exchange rate is 0.278 USD in ILS (a dollar is worth ~3.58 shekels). So we multiply by 0.278.
    The total is 3.7854*0.278 = 1.052 .

    Which is very very close to 1, but slightly higher.
    If the price is 6.66 ILS/Liter, it’s then $7 per gallon (7.006) . So if you fill a tank for 40 litres (~10.56 gallon) it will cost you $74.

  3. jon patrick says:

    Not surprisingly, newpapers reporting today gas costs are rising once again, due to ‘increased optimisim’. HA!

    Oddly, I stumbled across a company that is a membership club – like Costco – but they give rebates of 50% on your monthly gas purchases. It was worth checking out for me.

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