Why Gas Prices Rise
(interesting)
When Jay Ricker, owner of the BP filling station off Interstate 70 in Plainfield, Ind., set the price of unleaded gasoline at $3.44 per gallon on Monday of last week, it was 4 cents higher than the Friday before.
That alone might have been irritating to drivers paying the highest gas prices in more than two years. It was even more so because it happened on a day when the price of crude oil, which is used to make gasoline, fell almost $1 a barrel.
"It's up 20 cents one day, down 10 cents the next day," says Oscar Elmore, a courier who was filling up his Ford Taurus at a RaceTrac service station in Dallas recently. "It sounds kinda fishy to me."
Gas prices rise when oil prices rise, and fall when oil prices fall — except when they don't. What you pay at your filling station depends on an array of factors, from what happens on an exchange in New York to what the competition is charging.
This can rankle drivers, especially these days. Gas reached a national average of $3.51 a gallon on Monday. That's up 14 cents, or 4 percent, over the past week. The week before, the average rose 20 cents, the steepest increase since September 2008.
A year ago, the price was $2.75. The average is the highest it's ever been this time of year, and analysts expect it to climb higher in the coming weeks.
Unlike an iPhone or a pair of jeans or a Big Mac, oil and gas are commodities, and their prices can change every second at the New York Mercantile Exchange and other trading hubs. Those far-off changes affect the cost of the next day's commute. Sellers of commodities, like gas station owners and refineries, price their product based not on what it costs to produce it, but on what it costs to replace it.
Station owners need to make enough money selling the gas they already have to pay for the shipment they have coming. At busy stations like the Plainfield BP, those shipments are delivered several times a week.
Oil is the biggest factor in gas prices. It accounts for 50 to 70 percent of the cost. Recent upheaval in the Middle East and strong demand for oil around the world have pushed oil prices over $100 a barrel for only the second time in history. But the price of a gallon of gas at the pump rises — and, yes, falls — for a number of other reasons.
Oil prices can be moved by geopolitics, the value of the dollar or Chinese demand. Gas prices can be moved by oil prices, refinery problems or even weather that might keep drivers at home. For example, gas prices are expected to rise in the next few weeks as refiners switch from cheaper winter blends to more expensive summer ones because the warm air makes gas evaporate faster.
"We have to pay whatever the market says we do. It's an instantaneous world," says Joe Petrowski, CEO of Gulf Oil, a big gasoline wholesaler.
When Jay Ricker, owner of the BP filling station off Interstate 70 in Plainfield, Ind., set the price of unleaded gasoline at $3.44 per gallon on Monday of last week, it was 4 cents higher than the Friday before.
That alone might have been irritating to drivers paying the highest gas prices in more than two years. It was even more so because it happened on a day when the price of crude oil, which is used to make gasoline, fell almost $1 a barrel.
"It's up 20 cents one day, down 10 cents the next day," says Oscar Elmore, a courier who was filling up his Ford Taurus at a RaceTrac service station in Dallas recently. "It sounds kinda fishy to me."
Gas prices rise when oil prices rise, and fall when oil prices fall — except when they don't. What you pay at your filling station depends on an array of factors, from what happens on an exchange in New York to what the competition is charging.
This can rankle drivers, especially these days. Gas reached a national average of $3.51 a gallon on Monday. That's up 14 cents, or 4 percent, over the past week. The week before, the average rose 20 cents, the steepest increase since September 2008.
A year ago, the price was $2.75. The average is the highest it's ever been this time of year, and analysts expect it to climb higher in the coming weeks.
Unlike an iPhone or a pair of jeans or a Big Mac, oil and gas are commodities, and their prices can change every second at the New York Mercantile Exchange and other trading hubs. Those far-off changes affect the cost of the next day's commute. Sellers of commodities, like gas station owners and refineries, price their product based not on what it costs to produce it, but on what it costs to replace it.
Station owners need to make enough money selling the gas they already have to pay for the shipment they have coming. At busy stations like the Plainfield BP, those shipments are delivered several times a week.
Oil is the biggest factor in gas prices. It accounts for 50 to 70 percent of the cost. Recent upheaval in the Middle East and strong demand for oil around the world have pushed oil prices over $100 a barrel for only the second time in history. But the price of a gallon of gas at the pump rises — and, yes, falls — for a number of other reasons.
Oil prices can be moved by geopolitics, the value of the dollar or Chinese demand. Gas prices can be moved by oil prices, refinery problems or even weather that might keep drivers at home. For example, gas prices are expected to rise in the next few weeks as refiners switch from cheaper winter blends to more expensive summer ones because the warm air makes gas evaporate faster.
"We have to pay whatever the market says we do. It's an instantaneous world," says Joe Petrowski, CEO of Gulf Oil, a big gasoline wholesaler.
No comments:
Post a Comment