Why Does the Price of Gas Fluctuate?


Quick Answer

Gas prices fluctuate according to changes in supply, demand, infrastructure and the value of the dollar. These changes emanate partly from shifting geopolitical dynamics around the world, such as the gasoline needs of developing countries.

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Full Answer

Several factors directly affect the supply of gasoline, which in turn affects prices. One such factor pertains to oil refineries and their tendency to perform annual maintenance every spring. This annual maintenance lowers the capacity at which they can refine oil, shrinking available amounts of gasoline and inadvertently causing prices to spike.

The United States alone guzzles 178 million gallons of gasoline daily. Around holiday time, these demands increase and, correspondingly, so do gas prices. Demand and infrastructure go hand in hand, such as in a place like China, where huge increases in the numbers of drivers multiplies the global need for gasoline. On the other hand, when infrastructure is debilitated, the gas industry supply chain is temporarily interrupted or demand overwhelms refinery capacity, the effect is often a sudden rise in gas prices.

Oil is traded in U.S. dollars on the international market. When the dollar is weak, Oil Producing Exporting Countries lose money on each barrel of crude oil they sell. OPEC compensates by charging more per barrel of crude oil.

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