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You don't have to go very far to find someone who knows about the reeling prices of gasoline. Here are some factors affecting the gas price you pay at the pump. |
List Of Factors That Affect Retail Gasoline Prices
Why Are Gas Prices So High?
The price of gas to run our automobiles just keeps on going up an up. Ever wonder why? As the sudden rise in gasoline prices have made people become more concerned, it would also be very important to know about the different factors that give rise to such increases in the first place.
There are four main elements (among others) that affect the pricing of gasoline in the retail market, primary of which is the price of crude oil in the world market.
Crude oil is the initial raw material from where gasoline is refined and derived from. Crude oil, a majority of it, is sourced and supplied from Middle East countries. It is these countries that have control over the price of crude oil in the world market.
Countries that get their crude oil supply from these oil producing countries are the most affected by the sudden increase in crude oil prices. Overall, crude oil pricing affects about 75 percent of the price tag for gasoline in the retail market. Rising costs in crude oil in the world market has quite an effect on the eventual price of gasoline. Crude oil price is usually determined by worldwide supply and demand.
Supply And Demand
Whenever there are supply disruptions of crude oil in the world market, it would greatly affect retail gasoline prices. If there is an event that slows down or a stop in production among crude oil producing countries, the lack of supply would send the crude oil price up.
And as the demand greatly increases due to crude oil being an essential ingredient for various industries, the rise in prices will trickle down into gasoline with crude oil being its raw material.
A Shortage of Gasoline?
Other things that might affect retail prices of gasoline include its availability and distance from supply. In areas where gasoline supply has to travel very long distances, there is a likelihood that prices for it may be higher than in areas in close proximity to the gasoline supply.
From the refineries, gasoline has to go through a series of transport hubs before it finds its way into the retail stations.
There are usually ports to go through as well as miles and miles of inland pipelines where it eventually reaches a main depot. From this depot, the gasoline may then be transported to the different gas stations by means of distribution trucks. With the distribution process this complex, having the gasoline supply far away from a certain gas station may eventually affect how its retail price may be formulated.
Environmental Factors That Affect Gasoline Prices
Aside from distance from supply, retail prices of gasoline may also be affected by environmental programs and local regulations being followed in a certain area.
There are certain areas, countries or states that require gasoline to be specially formulated to meet up with certain local standards. This is usually done in order to protect the environment.
Refining costs also can affect gasoline pricing. Different countries as well as areas have certain regulations when it comes to the gasoline products that they acquire fro the retailers. Some places require less polluting gasoline than others.
Some have higher standards than others. This usually means that the refining process for gasoline may be different from those following less stringent standards. Although this may prove to be helpful in some sense, added refining requirements can also be considered as additional costs for gasoline. The costs are eventually passed on to the consumers in the guise of higher gasoline prices.
Certain regulations require that refined gasoline be further reformulated in order to help reduce pollutants to be released into the air. This might require adding up certain chemicals in order to help reduce carbon monoxide emissions as well as other pollutants when gasoline is being burned.
In order to meet up with certain regulations of certain states and countries, such processes must be additionally performed and therefore may add up into the retail cost of the reformulated gasoline.
Competition Can Bring Down The Price Per Gallon
Another big factor of retail gasoline prices being different from one area to another is because of competition. Whenever there are quite a number of retail gas stations to choose from in a certain area, the likelihood of gasoline prices being cheaper there is high. The primary reason is, of course competition.
With many retail gas stations trying to share the local market with other retail stations, getting customers attracted is important. The most effective way to do this is by trying to offer cheaper gas prices than the competitor.
In an area having just a few gas retail stations available, the gasoline prices would tend to be higher. The reason for this is that the demand would still be a bit greater with only a few retail stations able to provide the supply.
In some cases, the consumer may be made to choose- whether to buy cheaper gasoline to a retail station location many miles away or buy gas from a nearer station offering more expensive gasoline prices.
Distribution And Taxes Are Other Factors That Affect Gas Prices
Aside from the price of crude oil and refining costs, distribution costs also account for a great deal of the retail price of gasoline in the market. Aside from shipping and overseas transport costs, distributing gasoline to the different gasoline stations in the area may also account for the retail price of the gasoline.
Some areas may have some difficulties obtaining their gasoline supply due to distance as well as accessibility while some have it easy because of being in close proximity to major gas depots. It is through this that gas prices may also differ from one area to another. Distribution also affects the gasoline retail price.
Taxes on gasoline also may affect how the product may be priced on the retail market. Different countries follow different sets of taxation for crude oil as well as gasoline. There are national as well as local taxes to contend with when it comes to gasoline. Some places have lower taxes put on gasoline as compared to others.
But these places have something in common in that these taxes affect gasoline prices a great deal. The higher the taxes placed on crude oils products and byproducts such as gasoline, the higher the price tag would be when it finally arrives in the retail market.
Controlling the taxes put on gasoline may be a way to bring gasoline prices down to some extent. But they are not the only answer to an eventual reduction in gas prices.
The final point is that high gasoline prices seem to be a permanent part of life. Our part is to drive less, practice gas saving techniques when we do drive and bring down the demand for gasoline as much as possible. Let's work together.
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