With summer just a few precious months away, most Americans are already bracing for some of the steepest fuel prices in years. According to the Associated Press, unrest in places like Libya has seen the average price tag on a gallon of gasoline rocket skyward by 38 cents per gallon, or around 15 percent, since February 15. In fact, the price per a barrel of 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]