We all know that gas prices are notoriously fickle. They will be stable for long periods of time and suddenly spike, or conversely tumble, at the drop of a hat. And over time dramatic changes can occur. Our contact at Thunder Chrysler (Bartow, FL) reminded us that just a little over 6 years ago, the national average for gas was over $4.25 per gallon. Today prices are close to half of that (thankfully!) Ever wonder why the price of gas changes so much? Well, there are a variety of factors at play – some seasonal, some globally-driven, and some the result of weather-related events. Here’s seven contributing factors to consider:
- Crude oil is simply volatile
The most obvious determinant of gas prices is the cost of crude oil. Fluctuations in gas prices tend to track fluctuations in crude oil and there are many factors at play with crude oil prices. Today, oil prices are at a low due to Saudi Arabia’s hesitance to cut their output and a booming North American oil production. It a matter of basic economics, when supply of a commodity is high, prices tend to drop.
- Demand shifts
Drivers tend to hit the roads more in the summer, driving up demand for gas, and driving up prices as well (again, supply and demand). In the winter, rough roads and inclement weather encourage motorists to keep the car in the garage – or at least avoid long road trips and that drives demand down.
- Summer blends
Gas stations sell “summer blend” gas during the hot summer driving season and revert to “winter blend” in the winter. The reason for summer blend gas comes down to trying to control VOCs (volatile organic compounds), these are components that are more likely to evaporate the hotter it gets and create smog. Unfortunately, mixing up summer blend gas costs more money per gallon to make. The result for the consumer: summer blends can be some 10 to 15 cents per gallon more expensive than winter blends.
- The weather
Weather-related disasters like hurricanes can also push up gas prices. The bulk of American refineries and many oil drilling platforms are concentrated near the Gulf Coast where late summer tropical storms and hurricanes can disrupt operations. For a good example, look no further than hurricane Harvey that hit Texas very hard and shut down several oil refineries.
- Location, location
Gas prices vary widely based on where you are, after all it takes time and money to transport gasoline to places that are far away from petroleum distilleries. Want a good example? In remote Hawaii, with no distilleries nearby, gas prices are usually some 30% higher than on the mainland.
- Taxes
Where you live can have a big effect on what you pay for gas due to local taxes. South Carolina, for example, taxes gasoline sales to the tune of 35.15 cents per gallon (as this article was written) while North Carolina taxes some 55.15 cents a gallon. And, big surprise, those tax differences are passed directly along to consumers.
- Switching over
Refineries switch over to different gas mixtures twice a year. Spring, in particular, is a time when refineries shut down because they need time to switch over to summer blend gasoline. Even though this switch over takes just a few weeks, the interruption in gas flow drives prices up a bit.
