At the moment, much of the U.S. is experiencing lower gas prices (hooray!) and according to predictions, prices could dip even lower come October and November. As a fleet fuel card company, we’re constantly aware of the rise and fall of gas prices, but what exactly affects it?
Crude Oil
The largest factor in gas costs is the price of the crude oil from which it’s refined. Since crude oil is a global commodity, any factors can affect its price including the economy, the supply, and the demand for the petroleum products that crude oil makes (such as propane, kerosene, lubricants, etc.). Once the price of crude oil is determined, the price of gasoline can be determined.
Seasonality
The changing seasons also affect the price of gas. Come summer, people travel more, which means there are more carbon emissions released into the air. Because of this, a special summer blend of gasoline is created to burn cleaner, and therefore, costs more than the blend of gasoline offered in winter. (For more information on this, read our article “Why Is Winter Gas Cheaper Than Summer Gas?“)
Taxes
When it comes to taxes, there is a federal, state, and local tax on each gallon of gasoline. Currently, the federal tax amount is around 18 cents per gallon, but state and local taxes vary. This is why gas prices in Missouri may be cheaper than gas prices in California. In some areas, there are additional county and city taxes as well.
Distribution Costs
The price of gas can vary based on where it came from. Most gasoline is shipped via pipeline from the refinery to a branch that blends it with other products like ethanol. The blend is then distributed to local gas stations via tanker trucks. While some gas stations are owned by refiners, others are individual businesses, and the price of gas at each can vary.
Weather
Usually, the milder the weather, the lower the gas prices. If much of the country ends up being hit with a huge snowstorm, the demand for gas is going to rise in order to heat homes. If the weather stays mild, crude oil reserves will build up and the demand for gas will go down, lowering prices.
