What Influences the Price of a Gallon of Gas?


Quick Answer

Crude oil prices have a direct effect on gasoline prices at the pump. Other factors that cause prices to vary between different retailers are volume purchased, delivery method, the retailer's contract terms with their supplier and whether or not the company sells under the brand name of a refiner.

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Full Answer

Supply and demand is the primary factor that influences the price of crude oil, which forms the bedrock of retail gasoline prices. As of March 2015, prices are unusually low as Saudi Arabia has been dumping oil on the market in an attempt to combat increased production in the United States.

At the retail end, a number of factors determine where individual gas stations set prices. Stations that sell under a refiner's brand name generally have higher costs in return for the refiner's signage, marketing and proprietary fuel blends. These stations may also pay a higher price for direct deliveries from the refiner. Retailers who own multiple locations and can purchase in high volume may also get better deals from the refiner, translating into lower prices at the pump. The terms of the retailer's contract with the refiner may also influence the price paid regardless of current crude oil market conditions.

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