Strong and increasing demand for gasoline and other petroleum products in the United States and the rest of the world can place intense pressure on available supplies. Click to enlarge. Gasoline prices tend to increase when the available supply of gasoline decreases relative to real or expected gasoline demand or consumption. Gasoline prices can change rapidly if something disrupts crude oil supplies, refinery operations, or gasoline pipeline deliveries.
Even when crude oil prices are stable, gasoline prices fluctuate because of seasonal changes in demand and in gasoline specifications. World crude oil prices reached record levels in as a result of high worldwide oil demand relative to supply. Significant growth in demand in China, the Middle East, and Latin America, combined with market uncertainty in world supply, contributed to the run-up in oil prices and, in turn, to record-high gasoline prices in the United States.
Historically, retail gasoline prices tend to gradually rise in the spring and peak in late summer when people drive more frequently. Gasoline prices are generally lower in winter months.
Gasoline specifications and formulations also change seasonally. Environmental regulations require that gasoline sold in the summer be less prone to evaporate during warm weather. This requirement means that refiners must replace cheaper but more evaporative gasoline components with less evaporative but more expensive components. In through , the average monthly price of U. The supply of gasoline is largely driven by crude oil supply and refining, imports of gasoline, and gasoline inventories stocks.
Weather-related disasters like hurricanes can also push up gas prices. The bulk of American refineries are concentrated near the Gulf Coast , where late summer tropical storms and hurricanes sometimes disrupt both refining capacity and offshore oil drilling. And those disruptions can be passed along to the rest of the country if the coast loses power. Gas prices vary widely based on where you are in the US. Varied tax rates mean gas in South Carolina — which taxes only Refineries tend to do regular upkeep work in the fall and spring, which can lead to interruptions in the supply of gas.
And when supply is limited, prices go up. Refinery problems are less of a threat in the summer and winter — i. But with demand for gasoline high in the summer, Green says, winter is the only time when steady supply and low demand result in cheap gas. For you. World globe An icon of the world globe, indicating different international options. Get the Insider App. Click here to learn more. A leading-edge research firm focused on digital transformation.
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Generally speaking, in regional areas the volume of petrol sold is lower because there are fewer customers. Retail sites with higher volumes of sales can spread fixed costs such as rent and maintenance, which often remain the same regardless of sales over a greater volume, which lowers their unit cost.
Lower volumes of sales can mean stocks are not replenished as frequently at regional sites as they are at metropolitan sites, which can lead to a lag in price movements in regional areas. The Northern Territory's peak motoring organisation, Automobile Association Northern Territory AANT , has complained about the apparent lag behind recent price drops, claiming that Territory drivers are not yet seeing the benefits of plunging wholesale fuel prices.
Additionally, regional sites often require petrol to be transported further from the fuel terminals, meaning higher freight costs. We acknowledge Aboriginal and Torres Strait Islander peoples as the First Australians and Traditional Custodians of the lands where we live, learn, and work. Supply and demand An oversupply occurs when there is more oil on the market than people are consuming.
Value of the dollar International benchmark prices for petrol, diesel and LPG are priced in US dollars, so the strength of the local currency can affect the price of petrol. Petrol price cycles Patterns of pricing in capital cities see prices go steadily down followed by a sharp increase. Competition of local market Lower prices are typically seen in cities with a higher number of independent retailers, because the competition between retailers is higher.
Location factors Generally speaking, in regional areas the volume of petrol sold is lower because there are fewer customers. Crude oil prices have nearly doubled in the last year, an increase equivalent to about 35 cents per litre. While the cost of crude oil represents only one portion of the retail price of petroleum products such as gasoline, rising crude oil prices are the single most important factor behind recent increases in petroleum product prices.
There are many factors, apart from the price of crude oil, that also affect the price of retail gasoline. These include, but are not limited to: transportation costs incurred to deliver gasoline to retail outlets, refining and marketing costs and margins, inventory levels and local supply problems.
Higher demand, particularly in the summer months, can also drive up prices. Any of these factors can result in temporary fluctuations or regional differences. Gasoline is made in refineries which transform crude oil into useable fuels like gasoline and diesel oil. Factors that can have an impact on the amount of gasoline being refined include:. Ultimately, any reductions in the production of gasoline work their way to the pump and push prices upwards for consumers. The refining and retailing margins also cover the costs for transporting the crude oil to refineries and gasoline to gas stations, and the marketing costs.
Anything that affects how much crude oil or gasoline is available globally affects the prices we pay at the pump — and the effect is immediate. World events such as wars or severe weather disasters such as Hurricane Katrina in , and local events such as a refinery breakdown, can disrupt the flow of crude oil and oil products to Canadians. The oil markets are extremely sensitive to these events and react quickly by raising or lowering prices if the available supply goes up or down.
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