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This is a great summary of the commonly asked questions about gas prices.
|Why have gas prices risen so dramatically over the past couple of years?|
|A Recent History of Gas Price Increases and Their Causes: Gas prices are impacted by a number of factors, each individually placing its own pressure on our overall energy system. Some affect the price of crude oil and others affect the cost of producing and marketing gasoline, but combined, these factors greatly impact the fluctuation of gas prices that we experience on a daily basis.Changes in crude oil prices - Crude oil prices are determined by worldwide supply and demand, with significant influence by the Oil Producing and Exporting Countries (OPEC) as they determine how much oil to produce and sell to other countries. The more crude oil OPEC chooses to produce and release, the lower the price. Additionally, because oil is traded in a world market, events in remote areas affect the price of crude oil for almost everyone. In recent years, worldwide events that have impacted gas prices include:
Refinery imbalances - Oil refineries are plants where crude oil is processed and refined into more useful petroleum products, such as gasoline, diesel fuel, heating oil, and kerosene. Currently, imbalances within the U.S. oil refinery industry have contributed to the steady increase in gas prices. With economic growth in the U.S., our demand for gasoline has increased greatly. However, despite the demand increase, domestic refining capacity has declined as a result of the refining industry operating with lower inventories of both crude oil and gasoline as a means of cutting costs. This has reduced their ability to meet sudden oil demands in the U.S., which leads to greater price pressure. With these domestic refining constraints, a greater proportion of gasoline demand has to be met with imported products.
Seasonal changes - Other outside influences, like the time of year, can have a serious impact on gas prices as well. Gas prices increase greatly during the summer and holiday seasons because American’s travel increases during these times. For example, the American gas demand increases by 5% in the summer season, resulting in higher gas prices during these times.
|What national factors impact gas prices?|
|The Causes of Fluctuating Regional Gas PricesFluctuating gas prices do not depend solely on crude oil production. Gas prices naturally fluctuate regionally due to environmental programs, supply proximity, and retail competition:Environmental programs - Gasoline markets within the U.S. are separated by region because of varying air quality requirements established by the state. In order to meet these varying standards, oil refineries must use different formulations, called “boutique fuels,” which cause refiners to lose flexibility in production. This, in turn, creates an increase in price pressure.Proximity of supply - Americans living farther from the Gulf Coast, where half of gasoline in the U.S. is produced, tend to have higher gas prices because they are paying to cover the cost of transporting the gas from the refinery.
Competition in your local market – Local market competition varies from region to region, and gas prices will naturally reflect the amount of competition in your area. For example, more rural areas may experience high gas prices because there are fewer stations supplying gas. Likewise, an area with a number of stations will offer the most competitive prices because they are trying to offer the lowest price in an effort to draw consumers to their store.
|Where does my money go at the pump?|
|The Components of Retail Gas PriceGas prices fluctuate based on where you live, but the following breakdown is a standard representation of where your money is going at the pump.
|How are rising gas prices impacting the U.S.?|
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