As summer comes to an end, it’s time for the final road trips, vacations and family visits.
For most of us, those trips involve a stop (or two or three) at the pump to fill up. And as you’re standing there at the pump, you might wonder, what’s up with the price of gas?
So here’s a quick Gas Prices 101:
Gasoline is made from crude oil, so the starting point for the cost of gas, is the cost of crude oil (“crude” meaning, oil as it comes out straight out of the ground). How much that oil costs, is determined in a worldwide market: supplies from the U.S., from Mexico, from Russia, from Saudi Arabia, from all the countries that produce oil.
…Demand (from EVERY country on the planet)
Factories working overtime? More ships moving products overseas? More people working and able to afford better lives (including summer vacations)? Whether that’s happening in Canada or China, Nigeria or the Netherlands, South Korea or South Dakota – it means more demand for oil – and that pushes the price higher.
Don’t Be So Crude:
Now refineries here in the U.S., which turn that crude oil into our gasoline (as well as other fuels) – they buy their oil on that same world market as everyone else, so if the cost of oil goes up, the cost of gasoline made from that oil goes up. And that cost of crude oil, accounts for almost 60 percent of what we pay at the pump.
And Don’t Forget Us:
- There’s taxes – federal taxes, state taxes, local taxes and fees. That total varies a lot from state to state (if you’ve driven across a state line, you’ve probably noticed) – but as a general rule, all those taxes represent about 18 percent of the cost of gas.
- There’s the cost of actually turning oil into gas. Refining accounts for a little over 10 percent of the price of gas.
- There’s getting gas from refineries to gas stations, and the expense of the gas stations themselves (without which, we wouldn’t be standing at the pump wondering about this, because there’d be no pumps).
As you get ready for that final road trip or family vacation, check out our tips to get more out of your car, and enjoy the ride!
(And if you want to go a bit deeper into the price of gas, try the U.S. Energy Information Administration’s Gasoline Explained.)
Click here to read more about what’s new, what’s next and what it means for you.