What Affects Gas Prices?

According to the Los Angeles Times, there are approximately 253 million cars and trucks motoring down highways, coasting through scenic country roads, and experiencing the frustration of stop and go city traffic across the United States. Recent census data indicates there are about 242 million adults in the United States right now, meaning there are about 1.05 cars per adult in the US. That means, if you’re reading this, there’s a good chance you drive fairly regularly, and a good chance that you, like so many others, monitor gas prices.

 

Most people seem to keep a fairly cursory watch over world happenings when it comes to things like the price of crude oil. Few people who live outside of the world of economics, government or politics keep close tabs on OPEC or oil reserves and limits. What many do follow, quite stringently in fact, is the price of gasoline around them.

 

Current prices, just about $2.12 per gallon nationally, is the lowest prices have fallen in inflation-adjusted dollars since about 2002. While state to state prices differ greatly–from about $2.734 per gallon in Hawaii to $1.821 in South Carolina–the national average remains at one of the lowest prices we’ve seen in decades.

 

So who or what is to blame (or thank, perhaps) for low gas prices around the country? Many people look solely at the price of crude oil per barrel when determining the price of gasoline, though this doesn’t paint an entirely accurate picture. Oil is currently hovering around $42-$45 a barrel, though that’s not the only determiner for the prices of gasoline in America.

 

In recent years, the price of crude oil has actually had less of an impact on the price of gasoline as it has in the past according to the Energy Information Agency. Distribution and marketing costs, the costs of refining that oil, and taxes have all began contributing more to the price of gasoline in the last year as crude oil prices have become less impactful.

 

Another portion of the gas prices comes from our consumption, which is up this year, and threatens to break the all-time single year consumption record. This is the same reason that we also see gas prices rise during the summer: with the warm months comes more road trips, more driving, and more demand for gasoline. Simple supply and demand denotes that, with larger demand for gas by US drivers would come an accompanying rise in prices if the supply doesn’t increase at a comparable rate.