• Mar 11, 2011
With summer just a few precious months away, most Americans are already bracing for some of the steepest crude oil has been on a steady trek upward, and in kind, drivers have seen the numbers tick north at their local pumps. So why is it that when the price per barrel drops, as it did earlier this week, gas prices stay high?

The answer, it turns out, is due to a mix of factors. According to the AP, most gas stations set their prices not according to how much it costs them to replace the fuel, but in correlation with their closest competitors in the area. If one station ups their price per gallon, the rest will follow suit and vice-versa. That's because station owners typically only make two or three cents on every gallon of gasoline sold. Instead, they make their money off of the snacks and drinks inside.

Since stations may buy their fuel in long-term contracts to lock in a price for a set period of time, lowering the price per gallon too quickly could cause them to actually lose money on the fuel sold. Head over to Yahoo News for a full breakdown of the factors influencing fuel prices.

[Source: Yahoo News | Image: Paul Sakuma/AP]


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  • 48 Comments
      • 3 Years Ago
      "Speculation"-That tis all........
        • 3 Years Ago
        Thanks for bring some truth to the topic!
        • 3 Years Ago
        Not really, Libya produces Light and Sweet oil, the best oil out there and now it is partially OFF the market. So the increase is based on something.
        • 3 Years Ago
        But the difference in what Libya's production is versus the total global output, is a hiccup at best. It shouldn't be driving a 30% increase in gas prices at the pump over four months. There hasn't been any drop in production to alter the price of fuel that significantly.

        The United States gets most of its oil from Alaska, Canada, and South America. The price of oil and fuel here in the States shouldn't fluctuate much at all because of Libyan rebellion.

        The phony "futures markets" are what make the oil prices shift so dramatically. Speculative marketing is a way to artificially control the price of commodities, to ensure profit. If gas tops $4.50 a gallon in the USA, there will be major problems regarding food and other necessities, not just fuel. The result won't be pretty.
      • 3 Years Ago
      they only make 2 cents per gallon.?
      so they only get ~50 cents from my fill up.

      if 300 cars come in per day, they only get $150 dollars? no way. they can't survive on that.
        • 3 Years Ago
        Gas stations largely make their money selling stuff inside the store. The gas pumps up front are just there to get you to stop by. Though 2-3 cents a gallon sounds low, most gas stations I have looked up/asked about make 8-15 cents a gallon.
      • 3 Years Ago
      Contrary to Tea Party, Republican and Ayn Rand doctrine, this is a clear example of what Adam Smith was talking about when he addressed the flaws of the free market's ability to set prices and the need for proper government regulation in regards to pricing commodities.
      • 3 Years Ago
      All of these facts are true, But gas prices always go up once it gets warm, because OPEC knows people go on Vaction in the spring and summer. Same reason Roses are so expensive during the Hallmark holidays.
      • 3 Years Ago
      @ Sea Urchin, again,

      Just because the option is there doesn't make it a viable one for everyone.

      The option to walk to work is available for my neighbour, because he works down the street. Gas prices don't mean much to him in this sense.

      The option to walk to work is available for me, but I work a half hour's drive away. Sure, I can still do it, but its completely unrealistic and I sacrifice too many things.

      I don't think families that are struggling with rising gas prices are going to resort to eating mac and cheese every night just so they can buy a brand new prius (or equivalent.)

      It's not a black and white world out there, so let's try and argue about things from a realistic point of view.


      • 3 Years Ago
      I am surprised that we have not been inundated with "Tornado" devices and other fake "gas savers" like those pills to put in the gas tank. I suppose it is only a matter of time.
        • 3 Years Ago
        Be honest, you've got "Slick50 w/Teflon!" in your crank case and a quart of acetone in your gas tank.

        BTW: Does anyone have the schematics for the forbidden "100mpg carburetor" that the government and Detroit does not want me to know about? And if so, how do mount the "Tornado" to that?
      • 3 Years Ago
      @ Sea Urchin

      You forget that you have to look at the bigger picture when it comes to purchasing a more fuel efficient vehicle. You'll find that the math does not add up in many cases - you might actually pay MORE to drive in a new fuel-efficient vehicle especially if your current one is paid off.

      For instance - my dad was considering getting rid of his '93 Jeep Grand Cherokee V8 (good for 19-20mpg with his commutes) and buying something new like a Corolla or VW Golf/Jetta TDI.

      After factoring in things like insurance costs, maintenance costs, fuel price increases, car payments, etc. - he found that he was better off keeping his V8 Jeep. With his figures, it would take him several years just to break even, and that's even with the added MPG of the TDI!

      Additionally, we complain about increasing fuel prices because it hits our pocketbooks in more ways than simply the fuel we put in our vehicles. Goods, services, and other essentials go up in price when fuel goes up!
      • 3 Years Ago
      A magic 8 ball is the most reliable source for gas prices.
      • 3 Years Ago
      I'm from Norway, which is generally considered to be one of the richest countries in the world, as well as being an all-round place to live.
      For purposes of comparison, fuel prices here have recently been spiking to around $10 USD per gallon.
      Of these $10 USD, less than 5% per gallon is profit margin that the petrol station gets.

      Over 95% of our $10/gallon fuel is taxes that get funneled right back into our national budget.

      Makes you wonder why we pay regular taxes at all.
        • 3 Years Ago
        Yes we are indeed.
        Most folk pay 35-49% income tax, and regular VAT is 25% on anything but food and public transport, which are 14%.

        High income doesn't really help when you're paying all of it back through some tax or other :)
      • 3 Years Ago
      The answer is simple: collusion

      Why we continue to ignore that is beyond me.
      • 3 Years Ago
      Still much lower than prices in Europe.
      • 3 Years Ago
      I want to know how diesel became more expensive than gasoline. It used to be 30 cents cheaper now it's just as expensive or more expensive than premium fuel.
        • 3 Years Ago
        Since 2007 when the United States went over to Ultra Low Sulfur Diesel...
        • 3 Years Ago
        Diesel is more expensive because it requires additional processing to remove the high levels of sulfur out of the fuel. ULSD (ultra low sulfur diesel) is necessary for proper operation of the carbon cleaning systems (particulate filters) on the vehicle.
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