Factors That Affect Gasoline Prices
Gasoline prices seem to be one of the most looked after index in recent months. People seem to be wary of the rising gas prices and have become more concerned on how this will affect the other aspects of every day life. Of course, with such an essential necessity as gasoline, there would be many things that would in fact be affected in the worse sense.
As the sudden rise in gasoline prices have made people become more concerned, it would also be very important to know about the different factors that give rise to such increases in the first place. There are four main elements that affect the pricing of gasoline in the retail market, primary of which is the price of crude oil in the world market.
Crude oil is the initial raw material from where gasoline is refined and derived from. Crude oil, a majority of it, is sourced and supplied from Middle East countries. It is these countries that have control over the price of crude oil in the world market. Countries that get their crude oil supply from these oil producing countries are the most affected by the sudden increase in crude oil prices. Overall, crude oil pricing affects about 75 percent of the price tag for gasoline in the retail market.
Refining costs also can affect gasoline pricing. Different countries as well as areas have certain regulations when it comes to the gasoline products that they acquire fro the retailers. Some places require less polluting gasoline than others. Some have higher standards than others. This usually means that the refining process for gasoline may be different from those following less stringent standards. Although this may prove to be helpful in some sense, added refining requirements can also be considered as additional costs for gasoline. The costs are eventually passed on to the consumers in the guise of higher gasoline prices.
Aside from the price of crude oil and refining costs, distribution costs also account for a great deal of the retail price of gasoline in the market. Aside from shipping and overseas transport costs, distributing gasoline to the different gasoline stations in the area may also account for the retail price of the gasoline. Some areas may have some difficulties obtaining their gasoline supply due to distance as well as accessibility while some have it easy because of being in close proximity to major gas depots. It is through this that gas prices may also differ from one area to another. Distribution also affects the gasoline retail price.
Taxes on gasoline also may affect how the product may be priced on the retail market. Different countries follow different sets of taxation for crude oil as well as gasoline. There are national as well as local taxes to contend with when it comes to gasoline. Some places have lower taxes put on gasoline as compared to others. But these places have something in common in that these taxes affect gasoline prices a great deal. The higher the taxes placed on crude oils products and byproducts such as gasoline, the higher the price tag would be when it finally arrives in the retail market. Controlling the taxes put on gasoline may be a way to bring gasoline prices down to some extent. But they are not the only answer to an eventual reduction in gas prices