Elements that Determine Gas Prices
Every consumer is always baffled by the rise in gas prices because most of them do not understand why. Although consumers collectively protest over gas cost, very few know what exactly is to blame for the rise in gas price. In the post, you will learn the key elements that influence the price you pay at the pump as well as how why they are here for a long while.
Lots of people consider that the cost of oil solely influences gas prices. Certainly the two relate, there is much more into it. Oil is a major factor, but, there are countless of other factors that affect average oil prices. The US Department of Energy clarifies that prices of crude oil are concessions 59.4 percent of the average retail price of gas in early 2018. The other high-cost aspect is federal and state levies average around 18.3 percent. The cost of oil from 2007 to 2016 averaged 62 percent of the average retail gasoline price. The next chief cost feature is federal and state tills, averaging at 15 percent prior to refining costs, returns, distribution, as well as advertising. To better understand the dynamics of gas prices, let’s delve in to supply, demand, inflation and duties. Often we blame and focus supply and demand when explaining rise in has prices; however, inflation and taxes also contribute immensely to price increase.
A few simple demand and supply rules entail the foreseeable influence on oil prices. Oil extracted from the ground will not come out in the same manner everywhere. It is graded by its density or viscosity, and by amount of impurities it contains. The thin and pure of the crude normally determines the cost of gas.
The demand for such kind of oil is high due to fewer impurity concentration and the easier the refining process is, provided oil rig accidents can be avoided. The denser the oil gets, the more contaminants it has and needs further processing to refine it to gas. Light/sweet crude oil was formerly widely accessible and heavily sought-after previously. It is now much harder to find, resulting in a rise in oil prices.
There have been significant changes in the demand for gas. It is usually set by the number individuals who rely on oil to propel their automobiles. The rise experienced in the number of people owning car continue to grow, especially regions of the developing world. In countries such as India and China, the population has surpassed one billion and facing an expanding middle class. This middle class is more likely to drive more cars hence need more gas over time to avoid oil rig accidents.