As we fill up with gasoline every day, a lot of us sit back and wonder
how exactly is the gasoline price determined. What plays the part of
making the gas prices so low or so high. In this article, we are going to
explain a few factors that play a part in determining the gas prices.
Hopefully after you read these points, you’ll better understand the gas
industry and how gas prices are determined.
Amount of oil produced
Oil comes from all points of the world and as you may know by now,
a majority of the United States’ oil comes from the middle east.
If the oil supply starts to dwindle, this will cause less of a supply causing
the price to rise.
If the supply is too high, obviously the price will lower so that it’ll sell.
This will bring us into the supply and demand part of gas.
The cheapest gas in the country can be found in Kansas city for as low
as $1.29 per gallon, and the national average retail price for gas is
now down to $1.75 per gallon.
Without the high priced states of Alaska $2.60 and Hawaii $2.57, the
national average for the other 48 states is down to $1.72 per gallon
Using real gas prices from the eia in December 2008 dollars,
the chart above click to enlarge shows how today's gas prices compare
to past prices.
The last time real gas prices national average were as low
as $1.83 per gallon was five years ago in December of 2003, and the
last time real gas prices national average were as low as $1.29 per gallon
current Kansas city low price was almost ten years ago in February of
1999 see chart above
the price of petroleum means the spot price of either
wti light crude as traded on the New York mercantile exchange
nymex for delivery in Cushing, Oklahoma, or of Brent as traded on the
Intercontinental Exchange ice, into which the International Petroleum
Exchange has been incorporated for delivery at Sullom Voe.
The price of a barrel of oil is highly dependent on both its grade,
determined by factors such as its specific gravity or api and its sulphur
content, and its location. The vast majority of oil is not traded on an
exchange but on an over the counter basis, typically with reference to a
marker crude oil grade that is typically quoted via pricing agencies such as
argus media ltd and platts citation needed.
Other important benchmarks include Dubai, Tapis, and the OPEC
basket. The energy information administration EIA uses the Imported
refiner acquisition cost, the weighted average cost of all oil imported into
the US, as its world oil price.
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