Whether you drive to work every day or you’re planning to take a road trip in the coming months, gas prices can have a big impact on your life. And although we don’t really have any individual control over what we’re having to pay for gas at the pump, it can be helpful to know just why gas prices can rise or fall on any given day. So to help you better understand that area of business and the economy, here are three things that can affect gas prices in your area.
The Costs For The Refinery
When thinking about how gas prices get to where they are, it helps to start at the source. To get this natural resource out of the ground and into your gas tank, refineries have to pump, process, and more. As a part of this, the U.S. Energy Information Administration shares that different refineries will have different processes, equipment, staffing, blends, and so much more than can impact their final costs to do business. This means that the cost for the refinery to run and the profits they need to make in order to stay in business will directly translate to what you’re being charged at the pump.
How Far You Live From Your Supplier
Once the gas has been drilled, pumped, and refined, it then has to be transported to gas stations all over the world. So depending on how far the gas has to go in order to get to you, your prices could vary. According to Rob Wile, a contributor to Business Insider, if you live relatively close to a port, pipeline, refinery, or blending terminal, your gas prices will likely be lower than for those who live farther away. Because it doesn’t cost as much to have the gas transported to you when you live close to these areas, the savings can be passed on to you as the consumer.
Supply and Demand
Just like with all commerce, supply and demand can have a huge impact on the prices of gas as well. According to Prableen Bajpai, a contributor to Investopedia.com, if oil production surges for some reason, then gas prices will generally drop for a while since there’s more gas than the consumers need. But on the flip side, if oil production drops or if there’s a lot of demand for a limited amount of oil, then the prices for gas can skyrocket. There are a lot of factors that can contribute to adjustments in supply and demand as well, like climate, transportation needs, a population’s trends, geopolitics and more.
If you’ve been to a gas station and wondered just what causes gas prices to fluctuate so much, consider the information presented above to help you uncover some of the reasons why.