What Determines Gas Prices?

It seems like every time we visit the gas pump that prices vacillate. Why is this? Below are some of the significant factors that determine gas prices:

Refining costs: The cost of refining diesel fuel can be remarkably more expensive than the price of refining normal gasoline. Marketing and distribution play a big role in this. Crude oil is shipped to refineries and gasoline is transported from the refineries to distribution points and then to the service stations. The cost of transportation is in the hands of the consumer. Marketing the brand of the oil company is also added to the price of the gas you purchase.

Taxes: State and Federal governments have excise taxes on gasoline. There are some extra costs that could also include:

  • State sales taxes

  • Oil inspection fees

  • Underground storage tank fees

  • Gross receipts taxes

  • Miscellaneous environmental fees


Crude oil: Crude oil is the biggest portion of the cost of gas and is determined by countries in the world that are oil-exporting nations. Gas prices can still increase even if there is plenty of crude oil available. This oil can be classified as light or heavy and as sweet or sour. Light and sweet crude oil is less expensive to refine, but supplies can run low. There's plenty of heavy and sour crude oil available in the world. However, the refineries have to undergo pricey retooling to handle it.


Station markup: It probably doesn't come as a surprise that some of the money you spend at the gas station goes to the shop. There's no set rule of thumb for how much service stations add on to the price. It usually averages a few cents per gallon. There are markup laws in some states created to protect small gas stations from being put out of business by bigger chains that have the money to cut prices at specific locations.


If you have any other questions about gas prices or have auto repair needs, feel free to contact us at American Five Star Auto Repair & Transmission. Our skilled mechanics have been offering quality services for Tempe drivers for over 25 years, and we welcome you to experience our 5-star customer service for yourself. American Five Star Auto Repair & Transmission is located at 2070 E. Apache Road, Suite 101, Tempe, AZ 85281. We look forward to your visit!


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