Dynamics of Gas Prices
Every consumer is always baffled by the rise in gas prices because most of them do not understand why. Although consumers collectively protest over gas cost, very few know what exactly is to blame for the rise in gas price. Keep reading as we have outlined a few key factors that dictate the price you pay at the pump, and why they are unlikely to change soon.
A lot of people have the impression that the cost of oil only dictates gas prices. True, there is s correlation between the two, but it is much more intricate than that. Although oil is a weighty aspect, but, there are lots of aspects that sway average oil prices. The US Department of Energy clarifies that prices of crude oil are concessions 59.4 percent of the average retail price of gas in early 2018. The subsequent high-cost dynamic is federal, and state tolls average approximately 18.3 percent. The oil cost between 2007 and 2016 was in the region of 62 percent of the average retail price of gas. The next chief cost feature is federal and state tills, averaging at 15 percent prior to refining costs, returns, distribution, as well as advertising. It is worthwhile to have a look at demand, supply, inflation and levies so that you understand better the elements that impact prices of gas. Often we blame and focus supply and demand when explaining rise in has prices; however, inflation and taxes also contribute immensely to price increase.
Basic rules of supply and demand take account of the predictable effect on prices of oil. Oil extracted from the ground will not come out in the same manner everywhere. It is graded by its density or viscosity, and by amount of impurities it contains. The cost of gas is typically quoted by thin/pure crude.
That type of oil is in high demand because it has lower levels of contaminants as well as how much fewer time refineries take to prepare it provided oil rig accidents are prevented. The more viscous the oil is, the high impurities will be meaning that additional processing will be necessary to refine it to gas. Thin/pure crude was once extensively obtainable and on high demand in the past. Currently it is not easy obtaining the pure oil and that makes the prices of oil rise.
Over time, there have been momentous ups and downs in the gasoline demand. Typically, it is established by the number of individuals using the oil for their vehicles. This rise in the number of individuals remains to expands particularly in regions of the developing world. In China and India, the population have gone over one billion and are seeing a growth of their middle class. This middle class is more likely to drive more cars hence need more gas over time to avoid oil rig accidents.