Gas Prices

Top 8 Things To Know About Gas Prices

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1

The price per gallon of gasoline is determined by several factors. 

2

There is a direct correlation between crude oil prices and fuel prices. 

Per-barrel costs for crude oil have risen due to a tighter global oil supply/demand balance and lower inventories compared to last year. You can read about the relationship between crude and gasoline prices here.

 

3

Strong domestic production = Savings for U.S. consumers. 

International crude prices are significantly higher than domestic prices, with West Texas Intermediate (WTI) typically a few dollars less per barrel than global crude. Strong domestic oil production means that prices at the pump are lower than they would be absent substantive U.S. production.

4

Prices are still below historic average. 

Although gasoline prices have increased recently, they’re still lower than they were four years ago, largely because of increased domestic oil production. The surge in domestic oil production since 2014 has made the U.S. the world’s leading producer of natural gas and oil and puts downward pressure on the domestic and global cost of crude oil.

5

Global oil prices are based in U.S. dollars. 

One of the factors that can impact the price of oil is the exchange rate because oil is bought and sold in U.S. dollars in the global market place. When the dollar weakens against other currencies, that means those countries can buy oil at a lower price in their local markets, and the lower price can stimulate demand. Over time, the changes in price send signals to the market to increase or decrease production and also change demand until a rough equilibrium is reached between supply and demand. 

6

Gas taxes, and therefore prices, vary by state. 

Gasoline taxes in West Coast states range from 55 cents per gallon in Oregon to 73 cents per gallon in California. Pennsylvania currently has the highest state gasoline tax at 77 cents per gallon. Some of the lowest gasoline tax rates are in the southern states, averaging less than 40 cents per gallon.

7

Increased demand for oil and the summer driving season can cause an uptick in gasoline prices. 

Before the upswing in U.S. production, gasoline prices rose by an average of 22 cents per gallon during the summer. Over the past three years, prices still rose — but only by 13 cents per gallon. 

8

Gasoline produced in the summer differs from that produced in the winter. 

Refiners and blenders follow different requirements for summer blend gasoline, which has a lower evaporation rate than winter blend gasoline, decreasing emissions as temperatures rise. According to the EPA, summer gasoline has 1.7 percent more energy than winter blend gasoline but is more expensive to produce. There have always been costs associated with making special clean fuels the government mandates for summer, but the growth of U.S. production has helped reduce prices and their volatility.