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The Reasons Gas Prices Change All the Time

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Gas Pump

Not a day goes by when the price of gas at the station near your house remains the same. Despite the vast majority of goods in the world being sold at consistent prices day after day, gasoline constantly fluctuates, to the point that a tank of gas could cost you $5 more later the same day. We all complain about this, but hardly anyone knows why this happens.

We’ve done some research and have identified the top five influences on gas prices.


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5 Reasons Gas Prices Constantly Fluctuate

Crude Oil Prices: Because refined gasoline comes from crude oil—a commodity that is traded and imported across the globe from particular sources—the going price of crude oil heavily affects gas prices. If certain exporting suppliers raise their prices or refrain from doing business, the cost of importing and purchasing crude oil increases, and those costs are eventually passed down to consumers at the pump.

Supply: Similarly, if there is a shortage or decrease in the supply of gasoline/crude oil, such as an oil shipment spill or natural disaster, gas prices will increase quickly and dramatically.

Consumer Demand: Like any commodity or good, supply and demand impact prices. In the case of gasoline, which has finite quantities available, prices tend to be higher in the warm seasons and around holidays when people travel most and gasoline is in higher demand.

Cost of Creating Gasoline: Crude oil doesn’t just show up at gas stations ready to be pumped. It requires refining and transportation. If the cost of either of these factors increases, gas prices will in turn rise to compensate for the extra profit drain.

Market Confidence: All of these previous factors influence market confidence. Economics is all about confidence and speculation, and if people are worried that there won’t be enough gas to go around, they’ll buckle down and raise prices, preparing for the worst. If the market is relaxed and trusting, then grips on wallets will loosen and prices will fall. This is the aspect that’s the hardest to understand, track, and predict, so it’s often where the most conspiracy theorizing happens.

What do you think? Should gas prices be regulated so they remain consistent, or should they follow the market and change day-to-day?


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Sources: WYSO, US Energy Information Administration