An Answer to the Ever-Present Question: Why Do Gas Prices Fluctuate?
Imagine you’re on your way to work, when you notice that gas prices are at an all-time low. After deciding that you will fill up on the way home, you continue through your workday without a worry. As you head home on empty, though, you realize—gas prices have gone up almost forty cents since this morning.
Sadly, this isn’t a fictional story. All across the United States, gas prices are fluctuating significantly, sometimes jumping at unbelievable rates. In 2008 alone, the national average was above $4 a gallon—only to fall to around $1.85. It seems like there is no reason behind these drastic changes in gas prices, causing many people to ask: why do gas prices fluctuate? We’ve decided to answer this age-old question, hopefully making it easier to understand why the price of gasoline changes so much—even if it won’t make it any less frustrating.
Basic Crude Oil Supply and Demand
There are a variety of factors that affect gas prices in the US. Some are seasonal, others state-specific, even more globally significant—and all are extremely influential. One of the more recent price drops is attributed mostly to the basic idea of supply and demand. In recent years, North American crude production—the process that leads to the creation of gasoline—has increased at the same time that cars have grown more fuel-efficient than ever before.
Fluctuation in crude makes up 67% of the price of gasoline, according to the US Energy Information Administration. When there is more crude oil, its price decreases. With this price decrease comes a decrease in gas prices, too.
Seasonal (And Weather) Changes
As the weather gets warmer, more drivers hit the open road on their way to vacations. This increases the demand of gasoline, causing the price to increase, too. Along with the price increase that comes with higher demand, many gas stations offer a summer blend of gas, which is actually more expensive to produce. This specialty gas produces less smog, which is important during warm summers, but can cost up to 10 cents a gallon more.
If you look closely enough, you will notice that gasoline prices are often highest in the spring. It is during this time that oil refineries do regular upkeep work, limiting the supply of gasoline while the demand is increasing and causing prices to skyrocket. When there are weather-related disasters, such as hurricanes, you will also notice that gas prices will fluctuate significantly. The majority of American refiners are located near the Gulf Coast, which is a Petri dish of tropical storms and hurricanes. These harsh weather conditions can disrupt refinery capacity and offshore oil drilling, affecting the supply of crude oil and gasoline while the supply is growing.
Gas prices are significantly lower now than they were at this time last year, but that could very easily change for the better—or the worse.