How Are Gasoline Prices Calculated?


Quick Answer

Factors that determine the price of gasoline include the current price of crude oil, the costs of oil refinement, current tax rates and the expenses incurred by petroleum companies to market gasoline to consumers. Of these factors, the price of crude oil is the largest determining factor in gasoline price.

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How Are Gasoline Prices Calculated?
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Full Answer

The cost of crude oil accounts for about 70 percent of the price of gasoline, while the refinement process is relatively inexpensive and accounts for only about 5 percent of the cost to produce gasoline. Gasoline prices frequently fluctuate because the trading rate of crude oil is dictated by supply and demand on a global scale. Crude oil is a natural resource derived from the ground and takes time to form. It is used not only as a fuel source for engine-powered vehicles, but also as a heating source.

Since consumer dependence on oil has increased, the supply of oil has dropped. Additionally, since experts are not sure exactly how much time it takes for oil to form, it is not known whether or not the current supply of crude oil can withstand global demand. This accounts for the high value that is placed on crude oil as well as the steep rise in gasoline prices over a relatively short period of time.

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