3 Things That Impact How Much You Pay For Gas

The rising or falling of gas prices seems to always be something that’s mentioned in the news. However, what many people don’t know if just what factors come together to influence how much you’re paying for gas every time you go to fill up your car.

So to help you have a better understanding of this, here are three things that impact how much you pay for gas. 

The Price Of Crude Oil

One of the first things that can have an effect on how much you’re paying for gas is the price of crude oil. 

Crude oil is the state that your gas is in before it’s refined into the gasoline that you can use to fuel your car. And depending on how expensive it was to get it out of the oilfields and how much processing it needed to be turned into the gas we use, the prices can vary drastically.

According to Kimberly Amadeo, a contributor to The Balance, whenever the prices of crude oil have dropped or risen, the price of gas has followed right alongside it. This relationship shows that if the price of crude oil changes, you can expect to see the price you pay at the pump to change in a similar fashion. And because the price of crude oil can sometimes be pretty volatile, the price of gas will change frequently as well.  

Federal, State, and Local Tax Rates

Tax rates will also affect how much you’re paying for gas in any given city or state that you are. 

The U.S. Energy Information Administration shares that local, state, and federal taxes all get added to the base price of gas, which can add up to you paying a lot more than what its actual price is. As of June 2019, the federal tax on gas was 18.30 cents per gallon. And for state and local taxes, the average was around 28.62 cents per gallon. When you extrapolate these numbers over each gallon of gas you’re purchasing, it’s easy to see how tax rates on gas can have a big impact on how much you’re paying when you’re at the pump. 

Supply And Demand

The economic principle of supply and demand will also have an influence on how much gas will cost the consumer. 

According to Hans Wagner, a contributor to Investopedia.com, if the supply for a preferred type of oil shortens, you can expect to pay more at the pump. Additionally, if it’s a popular time for people to be driving on the road, that demand for more gas can cause the prices to increase as well, as gas and oil companies can make more money. 

If you’ve ever wondered just why gas prices seem to fluctuate so much and what causes this to happen, consider how the price of crude oil, taxes, and supply and demand factor into this equation.