Why do gas prices change all the time?

Retail gasoline prices are affected by a variety of reasons. The price is mainly affected by crude oil prices, which is driven by supply and demand relationships. When the OPEC countries face shortages or have major conflicts you can expect the rest of the worlds’ gas prices to raise.

Another reason for gas prices to fluctuate is the changing of the seasons. Even if there is a stable supply of crude oil the gas prices will vary depending on the season. Gas prices tend to rise in the spring and peak in the late summer. This is due to the increased driving caused by better weather and vacations. In the U.S. there is about a 5% increase in demand during this part of the year compared to the rest.

Other factors that are incorporated into the final price of gas are distributing, marketing, refining, and taxes. Federal and state taxes are the second largest price factored into the final price of gasoline (crude oil price being the largest). Then come refining costs followed by distributing and marketing.

Some areas within the country face higher prices than others. This is can be due to distance from supply. Regions that are far from the pipelines generally have to pay more at the pump. Most of the major pipelines start in the Gulf Coast so the surrounding regions generally have the lowest prices. Another reason for differences of price can come from supply disruptions. Hurricane Katrina is an example of a disruption, causing gas prices in that area to go up because that region had to get its supply from other areas.