Components Affecting Gasoline Prices

With gasoline prices reaching alarming levels, more and more people would want to know what are the things affecting and influencing the price increases. Gasoline prices may not be set in as a simple manner as just any other product. There are certain components that, when affected can help give rise to gasoline prices. Here are those components:

Crude Oil
Gasoline comes from crude oil. A bulk of the crude oil supply for the global market is located in the Middle East. This region accounts for about forty percent of the world’s supply of crude oil. And in this region has an established organization called OPEC (Organization of Petroleum Exporting Countries) that sets the price of crude oil produced by their member countries. The OPEC also sets the rate of production at which each member countries should try to come up with periodically in order to set up a stable enough supply according to demand.

Refining
Price of crude oil is set on a per barrel basis. One barrel of crude oil contains 42 gallons which is then refined to become gasoline. Each barrel of crude oil then yields approximately 19.6 gallons of gasoline. Remaining yields include distillate fuel oil, residual fuel oil, jet fuel, and other products. The refining process may also affect the price of the end product.

The price of oil in the world market is based mainly on demand for it. When there is an increasing demand for gasoline in many parts of the world, particularly in the United States, crude oil prices tend to go up. The price of crude oil may also be affected by political happenings in some major areas of the world. Local conflicts especially in various oil producing countries which may have an effect in the world supply of crude oil may also have an effect on its price.

Distribution and Marketing
The distribution process that goes with providing the crude oil from suppliers to refineries that make it into gasoline down to the retailers who sell it to consumers can have a substantial effect on gasoline prices. By average, distribution accounts for about ten percent of the gasoline price. Distribution goes into a long process from crude oil to the end product, which makes it one of the more important components that affect gasoline prices.

The distribution process usually starts from an oil producing country shipping the crude oil to several refineries overseas. The refineries then transport the gasoline into a series of pipelines inland that lead to several of the major consumer areas. It is here that the gasoline may also be further blended or refined to match certain local regulations. The finished product may then be delivered to several retail outlets where the price is set according to certain factors such as supply, demand as well as competition.

Taxes
Gasoline prices may also be affected by taxes both local and countrywide. The difference in the taxes set for gasoline in different areas account also for other places having cheaper gasoline than in other areas. On average, taxes in general account for about ten percent of the price set for gasoline.