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Wednesday, May 4, 2016

Gas prices driving you crazy?

Thursday, July 30, 2009

It happens almost every time most people fill up their vehicle at a gas station. They fill up thinking they have the cheapest fuel within miles. Believing they've got a bargain in gas, no more than five or 10 miles down the road another gas station comes into view displaying their regular gas price to be a few cents cheaper. Or, the next day they come back to the same gas station expecting the price to be the same, but, more often than not, it ends up being a few cents higher.

Looking for a good bargain on gas can be frustrating for drivers. Even though there are Web sites that offer gas price information at points of interest, posting those prices is voluntary and there's no guarantee that they are up-to-date.

According to the Energy Information Administration (EIA), "Prices for all commodities fluctuate, but gasoline prices are generally more volatile than prices of other goods. For example, consumers generally have options to substitute between food products when prices change but most do not have that option for fueling their vehicles." So, what causes this fluctuation in gas prices?

Breaking down the price

According to the EIA, there are a number of factors to consider when evaluating the price of gas.

One factor is the cost of crude oil to oil refineries. This cost takes up much of the percentage of the price of gas at the pump -- about 50 to 58 percent for regular gasoline.

Another factor is the cost of refining crude oil into gasoline that can be used to fuel vehicles. That cost is reflected in about 16 to 17 percent of the price at the pump.

Marketing and distribution costs are another factor. These costs make up about 10 to 12 percent of the cost per gallon at the pump.

"Most gasoline is shipped from the refinery first by pipeline to terminals near consuming areas, where it may be blended with other products (such as ethanol) to meet local government and market specifications, and is then delivered by tanker truck to individual stations. Some retail outlets are owned and operated by refiners, while others are independent businesses that purchase gasoline from refiners and marketers for resale to the public," according to the EIA.

The last factor are local, state and federal taxes and retail station costs. Of course, taxes vary from state to state and from town to town, which is one of the reasons why gas prices can be different in different areas. Taxes on regular gas make up about 15 to 24 percent of the cost of gas.

National fluctuations

As to the up and down pattern the price of gas seems to take, the EIA says there are several variables that account for it.

Seasonal demand is one reason why gas prices seem to spike. Right before Memorial Day weekend is usually when a few more cents are added on to the gas price sign. In the spring, gas prices gradually rise and by summer they peak because people are driving more during this time, which means more gas usage. Rise in demand means a rise in cost. These spikes in the cost of gas usually taper off in the fall and winter seasons.

The price of crude oil is another reason why gas prices fluctuate. Crude oil prices are determined by supply and demand. Some factors that contribute to the cost of crude oil are war, conflicts in oil producing countries, political events and economic factors such as the decreasing value of the U.S. dollar. The U.S. dollar is the currency used to trade crude oil around the world.

"The Organization of Petroleum Exporting Countries (OPEC) has significant influence on world oil prices because its members produce over 40 percent of the world's crude oil and have more that two-thirds of the world's estimated crude oil reserves," according to EIA. "OPEC members are also the only countries that have 'spare production capacity' and the ability to bring more oil into production relatively quickly. Since it was organized in 1960, OPEC has tried to keep world oil prices at a target level by setting production levels for its members."

Gasoline supplies and demand for gasoline can have and up and down trend. Crude oil supply, refining, importing and inventories, or stocks, all act together when it comes to determining gasoline supplies. "Stocks are the cushion between major short-term supply and demand imbalances, and their levels can have a significant impact on gasoline prices," according to the EIA.

Regional fluctuations

Towns close to state boarders, such as Thayer and Alton, Mo., and Mammoth Spring and Salem, Ark., may see gasoline price fluctuations more, or it might seem more obvious to them, because of different taxes in each state. However, there are other reasons why the retail price of gas is different in different states.

States that are closer to a supply source may have a cheaper retail price on gas than states that are farther away.

According to the EIA, about 40 percent of gasoline in the U.S. is produced in the Gulf Coast. It is also where most gasoline pipelines start. Therefore, states that are closer to the Gulf, such as New Mexico, Texas, Arkansas, Louisiana, Mississippi and Alabama, generally have cheaper gas prices.

Local gas station prices can also vary, as many drivers may have noticed, expecially in rural areas. "Pump prices are often highest in locations with few retail gasoline stations," says the EIA. "Even stations located close together may have different traffic patterns, rents and sources of supply that influence their pricing. Drivers face a trade-off between stations with high prices and driving further to find a station with lower prices."



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