It seems that no matter what happens, gas prices rise. Many drivers are struggling as oil hits new highs, and there doesn’t seem to be any current end in sight at the pump. However, it’s important to understand how oil and gas prices work, and how each element affects drivers looking to fill up.
The fact is, while most drivers would love to blame the gas station, it’s not their fault. Gas stations have to purchase gasoline at a set price, and then they go on to pass that cost onto drivers. Actually, most gas stations only make pennies off of each gallon of gasoline; their real money comes from purchases of other items. In addition, a portion of each gallon of gasoline pumped at a filling station is actually made up of taxes. Different states tack on additional road taxes, maintenance taxes and others for gasoline, and some states have extra regulations which govern the exact chemistry of the gas citizens are pumping.
So who really determines the cost of a gallon of gas? Well, the issue is a bit complicated. First of all, it depends on where a gasoline provider purchases their oil. This oil is then refined into gasoline, but the original product is unrefined and out of the ground. While many people believe that America’s oil refineries purchase gasoline exclusively from the Middle East, the truth is, a lot of the country’s oil comes from Canada, Europe and America itself. While it’s true that a good portion of America’s oil does come from the Middle East, America would be able to survive without this supply.
Beyond that, it’s important to understand how OPEC shapes the price of gas. OPEC, which stands for Organization of the Petroleum Exporting Countries, is a group of countries which discuss how to best distribute oil and gas throughout the world. This group has a very large say in how oil is produced and by what means. Additionally, governments sometimes enact embargoes on other countries, meaning oil from major suppliers cannot reach certain shores.
Finally, environmental groups and political issues can stop oil drilling from taking place. Incidents such as the Deepwater Horizon in the Gulf of Mexico and the Exxon Valdez disaster of the ’80s often shutdown deep-water drilling and oil transfer, leading to higher prices. Drivers may also want to factor in the stock market, which involves traders and professionals who speculate about certain global events, which in turn, drive prices higher.