Price of Gas
By Oil and Gas | Category: Oil and Gas Industry
There are many factors that are important in determining the price of gas. Demand has a major influence on the price of gas. In the United States, demand for gas is often quite high during the spring and summer, as individuals take off for popular vacation spots and the whole country gets more active. Gas prices often spike around the holidays, like Memorial Day and Independence Day. However, this is not always the case, as prices do not always rise in the warmer months.
Sometimes the demand for gas puts a strain on refinery capacity. This often happens in the spring, when refinery maintenance is typically conducted. While maintenance is performed, the gas market may tighten, resulting in a rise in the price of gas. Fortunately, refineries are usually finished with maintenance by the end of May.
The price of gas is also influenced by oil in its most natural state - crude oil. Basically, when desirable crude oil is less plentiful in supply, gas prices go up. The price of gas is affected by the type of crude oil that is available. Oil is described as light, heavy, sweet or sour. Crude oil that is sweet and light is cheaper, less difficult to refine, and less plentiful in supply. By contrast, heavy, sour oil is more difficult and costly to refine, yet is widely available throughout the world.
The cost of transporting and marketing crude oil has a significant effect on the price of gas. Transporting crude oil involves moving it to refineries, followed by the shipping of gasoline to distribution points and, finally, gas stations. Marketing costs cover the amount of money spent in marketing an oil company’s brand. Both costs are passed on to the consumer as part of gas prices.
In the United States, federal, state, and local taxes account for a significant portion of the price of gas. Taxes on gas are considerably higher in Europe than they are in the United States. As a result, European gas prices are much higher than they are in the United States.
Individual gas stations play a role in the price of gas as well. Typically, gas stations add something to the price of gas in order to profit. There are no laws governing the amount a gas station may charge for its gas. As such, some stations mark up their gas a few cents per gallon, while others add on ten cents per gallon or more. Some states, however, have laws that prohibit gas stations from charging less than a certain percentage of the total cost of their wholesale gas orders. These laws are intended to protect smaller gas stations from being significantly underpriced by large, chain gas stations.
The price of gas may also be influenced by such things as weather and major disasters. World events and wars also affect the price of gas. Basically, any event or situation that affects the drilling, refining, and transporting of oil can have a significant influence on gas prices.
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