How Gasoline Prices Work

3963 Words Jan 11th, 2013 16 Pages
Introduction to How Gas Prices Work

Image Gallery: Hybrid Cars

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High gas prices can make you stop and think about your commute. See hybrid car pictures to see models that save you money.In May 2008, average gas prices in the United States approached, and in some places passed, $4.00 a gallon, shattering records. But this was nothing new to American consumers. May was a month of records that broke one after another, and that came on the heels of months of rising prices. And then the cycle continued, with prices eventually falling and then inching toward the $4.00 mark again in 2011.

Gasoline is the bloodline that keeps America moving, and tracking gas prices can feel like a roller coaster ride.
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We will discuss who controls the crude-oil market later. Also, growing demand can sometimes outpace refinery capacity. In the spring, refineries perform maintenance, which can place a pinch on the gasoline market. By the end of May, refineries are usually back to full capacity.

In the next section, we 'll look at where the money goes when you pay for gas.
Breakdown of Gas Prices

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Traders work in the crude oil options pit at the New York Mercantile Exchange, April 22, 2008. Oil posted a then-record high of more than $118 following oil demand from China and supply concerns from Russia and Nigeria.When you pump $30 into your tank, that money is broken up into little pieces that get distributed among several entities. Gas is just like any other consumer product: There 's a supply chain and several groups who are responsible for setting the price of the product. The media can sometimes lead you to believe that the price of gas is based solely on the price of crude oil, but there are actually many factors that determine what you pay at the pump. No matter how expensive gas becomes, all of these entities have to get their slice of the pie. According to the U.S. Department of Energy, here 's an approximation of where each dollar you spend on gas goes:

•Taxes: 13 cents

•Distribution and Marketing: 8 cents
•Refining: 14 cents
•Crude oil: 65 cents
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