Fluctuating fuel prices are always newsworthy, especially during the summer driving season when gas prices typically rise. Many people wonder why oil and gas prices change so often. The truth is that there are many factors that influence fuel pricing, including supply and demand, market speculation, and political tensions in oil-producing countries around the world. As you’ll learn in this article, there are five primary reasons why fuel prices change so often – and these reasons apply equally to other products besides gasoline.
Table of Contents
1) Gas Companies Control Prices
Retailers like oil and gas stations set their own prices, and gas companies typically do not control them directly. Gas companies can, however, affect retail fuel prices through how much they charge wholesale customers like distributors and trucking fleets for their products. If a gas company feels its products are moving too quickly on a particular market, it can adjust supply accordingly by raising wholesale prices to distributors. It’s up to those dealers to decide whether to pass along those cost increases at retail stations or absorb them themselves.
2) Crude Oil
For most people, fuel is made up of one thing: crude oil. But, what you might not know is that there are many other sources of fuel that aren’t made from crude oil. These include natural gas, coal, petroleum coke and other hydrocarbons. Crude oil prices are extremely volatile right now for a few reasons, including low inventories around parts of Europe and Asia. However, gasoline prices change daily because they are heavily influenced by many different factors including crude oil price fluctuations and government regulations regarding taxes and imports/exports.
3) Supply and Demand Dictate Prices
Prices at your local gas station aren’t dictated by a corporate headquarters or a corporate board of directors, but rather by a price that is negotiated with fuel distributors Shropshire. There are several factors that dictate how much you pay for fuel, including where you live and when you drive to refill your tank. This is because prices fluctuate according to supply and demand in an open market. In other words, it all comes down to whether there’s enough fuel available in any given region. When prices go up, it means there’s less fuel available per gallon—in other words, the less total volume of fuel available overall.
4) Taxes Are Also Part of the Price
Taxes can add anywhere from 10 to 30 per cent to fuel prices, depending on where you live. This isn’t always obvious—prices at a gas station aren’t usually displayed with taxes included. Because there are different state and local taxes, it can be difficult to figure out exactly how much tax you pay for a gallon of gas. However, what’s included in gasoline prices is usually just about everything involved in getting that gasoline from overseas producers and into your tank.
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