March 1, 2006
Gas prices fluctuate according to the price of crude oil. The price of crude oil, in turn, is determined by the world market and depends on the balance between world demand and supply. Currently, few countries supply the world’s oil, as these are the only countries that have oil reserves and production. The oil demand, however, encompasses demand from most of the world’s nations.
Another factor that determines pricing is how much gasoline we demand relative to the supply. The more we require, the more will be the gas price. There are some federal and state requirements that call for special gas blends with the intention of improving air quality. This makes the production of gasoline expensive, and thus, the price rises. The charges that are levied on gas have greatly affected gas prices over the past decade. Even changes in the petroleum industry, like mergers, make the gas price change over time. At present, the states of California and Hawaii have the highest-priced gas in U.S. However, compared to the rest of the industrialized world, it’s one of the lowest. The price of gas in Europe is more than twice that in U.S., due to higher fuel excise. And in other energy-importing countries like Japan, petrol costs are higher because of fuel transportation costs and taxes. However, some of the major oil-producing countries like Iran and Indonesia provide subsidized gas at low market prices.
Individual gas stations have no control over gas prices, as world markets determine the price. They can charge a margin of between 7 to 11 cents a gallon since gasoline is a commodity, and the gas station that charges more, tends to lose customers to other gas stations. This is the reason gas stations sell higher-margin food products in their convenience stores. It is during the weekends and holidays when American road travel is at its peak that gas prices soar, only to drop as the holidays close.
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