What Determines the Price of Gas?


Quick Answer

The United States Energy Information Administration shows that the price of gas is determined by the price of oil and its associated global supply and demand. Taxes, refinery costs and exchange rates also have effects, notes Investopedia.

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What Determines the Price of Gas?
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Full Answer

The cost of crude oil, from which gas is refined from, is the primary influence in determining gas prices. Crude oil prices are affected by its supply relative to the actual and expected demand for petroleum-based products, as explained by the EIA.

Fuel demand relative to its production is the chief factor in determining the price of gas, as detailed in The Atlantic. The relationship of supply and demand and its influence on gas prices was observed in 2011, when emerging industrial nations began to demand more oil and production, particularly in the Middle East, dipped. The imbalance between fuel demand and oil production resulted in exorbitant global gas prices.

Marketing costs, such as the price of operating gas stations, taxes and geopolitical problems influence the price of gas, notes Business Insider. The price of gas also varies by region; Gulf Coast states, such as Texas and Lousiana, have a lower average cost than states on the West Coast and in New England.

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