(FORTUNE Magazine) – THE MOST immediate and important effect of the Mideast turmoil for many Americans is at the gas pump. Higher prices are infuriating and often baffling. Says Marty Nyvall, Amoco Oil's manager of marketing: ''For the average consumer, this whole area is mysterious.'' Herewith, answers to basic questions about gas pump economics: Why did gas prices go up so fast? It's hard to blame consumers for wondering why they should pay 10 to 20 cents more a gallon just days after Iraqi tanks rolled into Kuwait City -- the oil companies were selling gasoline made from old, cheap crude, weren't they? ''They'd convince me better if they told me sunspots did it,'' says Tim Hamilton of AUTO, an organization of independent gasoline dealers in Washington State. The real answer is a combination of accounting and price-setting practices for crude oil. The last-in first-out method of accounting for inventory that most U.S. oil companies use causes them to price products according to the cost of replacing them, not according to historical cost. Reason: When it's time to figure profits for a given quarter, the cost of the most recently purchased oil is what gets subtracted from revenues. Since that cost went up quickly, oil companies must increase revenues quickly as well to maintain profit margins. Selling that to the public may be a losing battle, but former Mobil spokesman Herbert Schmertz thinks the industry should try. Says he: ''What the oil companies have not adequately explained is that in a market economy, you have to price at replacement cost.'' Those costs rose almost instantly after the start of hostilities because crude pricing has changed since the oil shocks of the 1970s and the emergence of the futures market in oil in the 1980s. ''In the past much foreign crude was bought on a contract basis,'' says Amoco's Nyvall. Now 80% of the time, the price isn't set until a tanker completes the four- to six-week journey from the Middle East. So refiners' costs went up the minute news of Iraq's invasion flashed around the world -- even though the oil they were receiving had been pumped weeks earlier. Why did gasoline prices rise so much? They didn't. A barrel of oil contains 42 gallons, so each dollar-per-barrel increase in the price of crude translates into about 2 1/2 cents more per gallon. Since May, when anticipation of OPEC's midyear meeting started prices up, the cost of crude has risen $10 per barrel. To completely cover this increase, oil companies would have had to raise prices 25 cents per gallon. But competition and consumer resistance have kept most increases well below this. Chevron Chairman ) Kenneth Derr says, ''We are woefully underrecovering our costs.'' Who wins and who loses from the price rise? The clearest winners are those who explore for and produce crude. Their costs don't rise and they are profiting from the sudden drop in overall output. Refiners are a more complex case. They profit most on the rare occasion when the cost of crude is declining and prices of refined products are soaring because of tight supply. They're squeezed now because competition keeps prices of refined products from rising as much as crude oil has. Average margins on refined products made from high-quality crude climbed to a 1990 high of $4 a barrel in mid-July, according to estimates by Petroleum Intelligence Weekly. But when crude prices turned back up, these margins shrank swiftly. By mid- August they had sunk as low as $1.89 a barrel. If prices stabilize, refiners' profits should fatten again. The integrated companies that produce oil, refine it, and retail the resulting products will on balance come out ahead. The losers: gas station owners who are restrained by competition -- and of course their wrathful customers.

CHART: NOT AVAILABLE CREDIT: SOURCES: OIL INDUSTRY EXPERTS, FORTUNE ESTIMATES CAPTION: PRICES AT THE PUMP: WHERE THE MONEY GOES . . .