Determining Gas Prices
One of the biggest costs of car ownership is how much gas it consumes. No matter what the weather is doing, no matter how your brakes and tires are holding up, no matter whether you’re planning to sell it – if you’re driving a car, you’re putting gas in it.
Gas prices can fluctuate wildly, throwing your monthly budget into crisis, or give it a boon. If you’ve seen financial TV, you know that news on crude oil is often followed by speculation on gas prices. The two are intrinsically linked.
Think globally
Crude oil contains several hydrocarbons that refineries use to produce, among other things, gasoline. Reference guide For Dummies says crude oil prices are the single biggest factor in gas prices. So then, what determines oil prices?
Supply and demand –When oily countries produce more crude than refineries need at the moment, gas prices drop and vice versa. There’s another layer according to economics website Investopedia: the futures market. Here, contracts are traded where one party agrees to buy a barrel of oil and the other party agrees to sell it, all at a pre-determined date and price. This is how oil prices as we know them are set. If there are more futures contract buyers, prices will go up.
Reserves – Since oil is a commodity in limited supply, it’s important for countries to stock up. About.com says the U.S. Strategic Petroleum Reserve is the world’s largest emergency stockpile of oil. This or other reserves can be tapped if prices get too high, or if supply runs short.
World Crises – Not just war, but natural disasters can affect an oily country’s ability to produce crude. Although recently, political unrest has been the biggest aspect (think Arab Spring and Iran threatening to block the Strait of Hormuz). Furthermore, oil is traded globally in the U.S. dollar. When the dollar drops versus other currencies, gas prices rise. The global political and economic climate can often be the single biggest element in crude oil price.
Other factors, such as refinery costs, economic cycles and taxes play a part in what you see at the pump. Keep an eye on the price per gallon and how cost effective your vehicle really is once you fuel it.
Need an auto body professional? Call Great Plains Auto Body 402.334.7100
