Did you ever wonder what the reasons for gas prices are? Why do so areas always have the lowest gas prices? What is the cause of high gas prices?
Five factors affect what you pay at the pump for gas. Generally, gas prices increase when the world crude oil market lowers inventories and when demand exceeds refinery capacity.
1. Crude oil supplies account for approximately 59% of the price for a gallon of gas. The crude oil supplies are determined by the world’s oil-exporting countries, mainly OPEC (the Organization of the Petroleum Exporting Countries). This determines what the price of a barrel of crude oil will be, which is one of the main reasons for gas prices going up and down.
2. Refining the crude oil accounts for around 10% of the total price of gas and there is really not much else to say about refining. So, moving on.
3. Transportation cost makes up approximately 11% of the price of gas. This is the cost of moving crude oil to the refineries and then the refined gas to a distribution point and finally to a local gas station. The cost of marketing a brand name gasoline is also included in this category.
4. Taxes are responsible for around 20% of the total cost of a gallon of gas. This is lumping federal and state taxes together. This along with transportation cost account for why some areas always have lower gas prices.
5. Local gas station market. I am sure you noticed that we have already used 100% in the first four factors. That is because the local gas station has little to no affect on the cause of high gas prices. They are in business to make money, yes, but they make their money on things sold inside the store. The market up on a gallon of gas at the gas station is generally no more than 10 cents. Yes, $0.10 and some stores only mark the price up a single penny. However, in some areas there is a required minimum mark up on a gallon of gas. This is to protect smaller business from large companies.