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There are many factors that go into determining the price of gas, although demand has a strong influence. In the United States, demand for gas is often quite high during the spring and summer, as individuals drive to popular vacation spots and the whole country gets more active. Gas prices often spike around the holidays, often on Memorial Day and Independence Day. This is not always the case, however, as prices do not always rise in the warmer months.
Sometimes the demand for gas puts a strain on refinery capacity. This often happens in the spring, when refinery maintenance is typically conducted. While maintenance is performed, the gas market may tighten, resulting in a rise in the price. Fortunately, refineries are usually finished with maintenance by the end of May, just in time for summer driving season.
The price of gas is also influenced by oil in its most natural state: crude oil. The type of crude oil that is available affects how much gas costs, and when desirable crude oil is less plentiful, prices go up. Oil is described as light or heavy, and sweet or sour. Crude oil that is sweet and light is cheaper and easier to refine, and less plentiful. By contrast, heavy, sour oil is more difficult and costly to refine, yet is widely available throughout the world.
The cost of transporting and marketing crude oil has a significant effect on the price of gas. Transporting crude oil involves moving it to refineries, followed by shipping gasoline to distribution points and, finally, gas stations. Money is also spent in marketing an oil company’s brand. Both costs are passed on to the consumer as part of gas prices.
In the United States, federal, state, and local taxes account for a significant portion of the price of gas. Taxes on gas are considerably higher in Europe than they are in the United States, so European gas prices are often much higher.
Individual gas stations play a role in the gas prices as well. Typically, gas stations mark up the price slightly in order to profit. There are no laws governing the amount a gas station may charge for its gas. As such, some stations mark up their gas a few cents per gallon, while others add on $0.10 US Dollars (USD) per gallon or more. Some states, however, have laws that prohibit gas stations from charging less than a certain percentage of the total cost of their wholesale gas orders. These laws are intended to protect smaller gas stations from being significantly underpriced by large, chain gas stations.
The price of gas may also be influenced by such things as weather, major disasters, world events, and wars. Any event or situation that affects the drilling, refining, and transporting of oil can have a significant influence on gas prices.
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