Q:

What factors affect fuel oil prices?

A:

Quick Answer

The cost of crude oil, the cost of refining the crude oil, taxes and distribution and marketing costs factor into the price of fuel. Additional factors include gas station owners profit and losses.

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Full Answer

Fuel comes from refined crude oil, and the price of fuel fluctuates as the supply and demand for crude oil ebbs and flows throughout the year. Historically, prices of crude oil are highest in the summer due to demand. Used globally, crude oil finds its prices set by the world market. Other factors that set this crude oil price include regional political strife, military actions, weather and the global economy.

Refining the crude oil adds additional costs onto fuel. During the summer, refiners produce a blend that costs more to create than the winter blend. Refineries additionally choose the Spring months to do planned maintenance, adding more costs to fuel as the supply of fuel gets disrupted.

As of July 2014, the federal tax rate on fuel is 18.4 cents per gallon, while state taxes average out at 24.17 cents per gallon. Twelve states add additional taxes on fuel, while the local and county taxes vary.

The influx of hybrid and electric vehicles into the market and higher gas mileage technology required in newer vehicles lowers the demand for fuel.

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