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Myriad Factors Affect Price of Gasoline

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Myriad Factors Affect Price of Gasoline

Lily Diagostine, Reporter

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For a product we use everyday, Americans know surprisingly little on the subject of gasoline and its costs. Factors that contribute to local gas prices are numerous and complex.

About 20 million barrels of petroleum products are consumed per day, according to the U.S. Energy Information Administration. However, these demands fluctuate, and supply doesn’t always keep pace.

Kayla Brown, an economic engineer for HollyFrontier Refinery in Tulsa, says this region’s gasoline sources vary.

“Pipelines have terminals everywhere, so it could be processed in Coffeyville, Kansas, the Gulf Coast, or even Tulsa,” she says.

Pipelines provide an interconnected, convenient, efficient way to transport gasoline. They are far cheaper than trucks, and those savings are passed onto the consumer.

When companies refine crude oil into gasoline, then sell the gas to market companies, they add a few cents to the cost of every gallon. Then the market company, QuikTrip for example, adds a few more cents.

Economic factors also contribute to the price of gasoline, especially federal, state and local taxes, Brown says.

According to the Oklahoma Policy Institute, “Only four states tax motor fuel at a lower rate than Oklahoma’s 17 cents per gallon.” A few cents added by different governmental agencies increase the overall price for the consumer.

Seasonal shifts are another common element for consideration. Demand rises in the spring with people out of school and going on vacations. In winter months, when freezing weather pierces cities, demand for gas will decrease.

“Nobody’s driving in cold weather,” Brown says.

The price per gallon also depends on the density of gas stations. Those clustered together in cities and suburbs usually have competitive, cheaper pricing; those in small towns and rural areas often have higher prices.

Local transportation methods are another component.

“More people drive in Oklahoma,” says Brown, comparing our state’s residents to those in New York City, where people frequently walk or take public transit.

The price in Oklahoma is cheaper per barrel due to the correlation of lower personal vehicle ownership and the decrease in demand. The prices in a megalopolis may also be higher because of the trend common in rural areas. Fewer gas stations appealing to less private car owners typically have higher, less competitive pricing.

Lifestyle costs in certain locations also vary. Brown says HollyFrontier uses data from the U.S. Energy Information Administration to track salaries regionally. Economic analyses help to predict how demand will change for a given period, allowing oil companies to coordinate their production rates.

The availability of gas also causes price fluctuations.

“If the Gulf Coast overproduces, prices will drop,” Brown says.

Supply and demand mismatching can have detrimental costs, like disrupting the economy by rendering gas prices extremely low. Therefore, predicting economic factors helps companies match demand and provide consumers with readily available, inexpensive gas.

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