Early last week gas went down to $2.98 by my house. You better believe that the Dallas Tire Couriers, myself, and everyone else at Eagle Express was shouting “Hallelujah!” as they pulled up to the pump. I can’t remember the last time I saw gas go down below $3.00. I filled up and went on my merry way, but I guess cheap gas is like having cash in your pocket. You got it, so now go spend it! By the middle of the week, my tank was already going on empty. “That’s ok,” I thought, “ gas is cheap”. (boy, the definition if “cheap” has certainly changed in the last five years, hasn’t it!?) I went back to the same pump I was at on Monday, and lo and behold, gas had jumped $.20! Why!? I didn’t notice any significant world events. No severe weather. No labor strikes at the big oil companies. So why is this gas more expensive than the gas I had in my tank last week?
That is a question our Dallas Tire Couriers can shed some light on. You see, because they drive around the metroplex and beyond delivering tires, gas prices are as important to them as they are to you. They know there are a few factors that go into the pricing of gasoline.
According to the US Department of Energy, gas prices are made up of four different parts. For each dollar you spend, the specified amount goes towards the following:
- Taxes: 13 cents
- Distribution and Marketing: 8 cents
- Refining: 14 cents
- Crude Oil: 65 cents
As you can see, crude oil makes up the biggest portion of gas prices. Crude oil price is set by the suppliers and is regulated by the Organization of the Petroleum Exporting Companies (OPEC). The amount of crude oil usually determines the price: more oil= cheaper prices. But that isn’t always the case. Sometimes there might be an abundance of oil, but it’s oil that is harder to refine. So the crude price is cheap, but the refining costs are high. That means the price of gasoline is high.
OPEC also has the ability to regulate how much gas is produced. If they choose to reduce production, it causes a shortage and gas prices rise. Remember that old law from economics, supply and demand? They have an inverse relationship with price. Supply decreases, demand remains the same (or higher), then prices increases.
Once the crude oil is pulled from the ground, it has to be refined (which, like we said, can be easy or it can be difficult), and then transported to the gas stations. Much like the work our Dallas Tire Couriers perform, the oil transporters distribute the product to the companies who distribute to the consumer. Each of these steps cost money that is added into the final price.
Then the individual stations receive the gas and set prices. Taxes and station markups have a big impact on the price gas, and they are responsible for the reason why gas can be cheaper on one side of the street than on the other. Federal and state governments regulate the taxes imposed on gasoline. In other countries, the taxes are much higher than they are in America, so their price for gas is guaranteed to be higher than ours.
Sometimes the gas prices are high because of true change in crude oil production. Hurricanes, military conflicts, damaged pipelines; each of these can have an impact on the price of oil. Anything that has the ability to affect the process, from the moment oil is drilled to the point it is put into pumps at the individual gas stations can affect how much you’re going to pay. Sometimes it’s a real problem. Sometimes it’s fictional hype. You just have to do like our Dallas Tire Couriers and make sure you’re conserving gasoline by driving safely, slowly, and responsibly because you never know what to expect when it comes to gas prices.