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What causes gas prices to dip in the United States?

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Quick Answer

Gas prices in the United States are influenced by a variety of factors, including the market price of crude oil, federal and state gas tax rates, financial market speculation and extreme weather; factors other than crude oil prices only account for about 30 percent of the price consumers pay at the pump, according to the American Fuel and Petrochemical Manufacturers group. Crude oil is found in limited locations on Earth, and its price is highly controlled by the nations that produce it, including the member states of Organization of Petroleum Exporting Countries (OPEC), an international organization of oil-producing countries that includes Saudi Arabia, Angola and Venezuela.

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Full Answer

Although OPEC does not represent the entirety of the world's oil supply, the organization's production capability and decision making does have a large impact on international gas prices. International sanctions sometimes affect OPEC member nations, such as Iran, which can also play a part in gas prices.

Aside from politics, some practical factors influence gas prices. For example, states that are closer to oil refineries and distribution centers tend to have lower gas prices, which is why gas prices in one region of the country can be dramatically higher than in other regions. Additionally, each gas station will build in business operation costs to the price of gas.

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