Gas prices go up and down, seemingly arbitrarily. But the fluctuations have a point, and there are reasons behind them. So what’s really driving the price? Most people think it’s the price of oil, but that’s only part of the issue. There are several things that affect gas prices and they aren’t tied to the cost of oil as closely as people think. Here’s what to look for when you want to understand the price of gas, and why it keeps changing every time you go to fill up your car.
A Lot of People Speculate on What Supply and Demand Will Do
Speculators must keep working to determine what’s going to happen with the supply and the demand of oil and gas. If they judge correctly they make money, and if they misjudge the market they could end up losing quite a bit. Other people listen to the speculators, and they may speculate on what those people are saying. So, over time, there are rumors and opinions that head down the pipeline along with the oil and gas. It affects what people think will happen, which affects what actually happens.
Sometimes Supply and Demand Don’t Do What People Expect
Market fluctuations can appear unexpectedly. Supply may be compromised for some reason that wasn’t anticipated, and demand could be higher or lower then speculators and others thought it would. If that occurs, the price of gas can change without the price of oil really changing, so they aren’t completely linked together in the way that a lot of people assume they are.
Yes, Oil is a Part of It, Too
The US Department of Energy states that oil prices comprise about 59.4 percent of gas prices. So the cost of oil is definitely tied to the cost of gas. It’s just not all of the cost of gas, like many people assume. There are state and federal taxes added onto the price at the pump, too, and profits and refining costs are in the mix. Then there’s marketing and distribution to consider. With so many parts of the equation to add up, don’t be fooled into thinking the price of oil is the only thing affecting how much it costs to fill your car. There are a lot of issues in play when it comes to what a gas station is charging you.
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