What Causes the Price of Gas To Increase?


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What goes into the price of gasoline? Gasoline is a commodity that most of us use everyday but ask the average person on the street what goes into the price per gallon and you'll likely get a confused look. In this presentation we'll unveil what really goes into the price you pay for gasoline.

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What Causes the Price of Gas To Increase?

  1. 1. Why Does A Gallon of Gas Cost So Much? Here is why gas prices are here to stay… and two ways to protect your wealth (even profit!) from high prices at the pump. Brought  to  you  by   DailyResourceHunter.com
  2. 2. What factors decide the price of gasoline?
  3. 3. Some popular misconceptions are… Large oil companies and local gas station owners raise prices just to make a quick buck. Gas prices are solely controlled by the monopoly power of the Middle East, which supplies mass quantities of oil to countries Stock traders, often referred to around the world. as ‘speculators’, bid the price of oil up, resulting in higher fuel costs for consumers.
  4. 4. These factors determine the price of gasoline per gallon.
  5. 5. 11% of the cost per gallon goes to taxes. This includes federal, state and, depending on where you live, sales tax too.
  6. 6. Distribution and marketing make up for 5% of the total cost per gallon. This is the cost of building pipelines, advertising, and transporting gas and oil.
  7. 7. … uK now Refining makes up 12% of Did Yo the cost. This is the process of turning crude oil into gasoline. Out of one barrel of oil, about 45% Large oil companies becomes the stuff you pump into your gas like Exxon, Chevron tank, depending on the quality of oil and and BP often buy crude oil on the open what’s usable. The rest of that barrel is market to supply their transformed into different hydrocarbon- own refineries, for based fluids and chemicals. logistical reasons. U.S. refineries process blends of gasoline that have to meet clean airpolicies. These blends are confined to certain regions. For example, you can’t sell Los Angeles gasoline inSeattle, or Seattle gasoline in Chicago.
  8. 8. Crude oil accounts for 72% of the cost yourlocal gas station charges. When the price of oil rises so does the price of gasoline. Remember that oil is a product traded in a world market. With everyone bidding on the same barrels of oil, prices steadily rise.   So even though the U.S’s demand for oil may decrease, China and India’s demand may increase, thus raising the price that everyone has to pay for it.
  9. 9. With reserves of easy to Extracting oil in these places acquire oil running low, requires more energy and companies must obtain oil in leads to higher oil prices. tar sands, in shale, or offshore.
  10. 10. An area that often gets blamed for the rising price ofcrude oil is too much “speculation” in the market place. The news might tell you that “speculation” is where bigshot Wall Street bankers bidding the price of oil higheris resulting in higher fuel costs. But that’s not the case. For example, the crisis in Iran has the entire oil industryworried. Iran is the 4th largest oil producer andcontrols access to the Strait of Hormuz which serves asa passageway for 20% of the world’s oil and 90% of alldaily oil shipments from the Middle East. Oil traders anticipate that a war in Iran would likelydisrupt the supply of oil from the Middle East andcause a greater spike in the price per barrel. Sonaturally, buyers will pay a little more for oil nowbefore it skyrockets in the future. That’s what speculation is… buyers and sellers tryingto estimate what prices will be in the future based onwhat’s happening in the world. But it’s the news that’sreally driving the price.
  11. 11. Perhaps the biggest factor affecting the price of crude oil is inflation. Worldwide oil is priced in US dollars -- so as the value of the dollar decreases the price of oil increases. Over the past 50 years, the dollar has lost 87% of its purchasing power. This is the biggest reason why you have to pay $4 for a gallon of gas today when it would have cost you 50 cents fifty years ago.
  12. 12. What can you do to lessen the impact you feel at the pump? If rising oil prices are inevitable, take advantage of it.
  13. 13. Tip #1 Invest in companies that transport oil and gas. These companies make more money when the price of oil increases and in turn will earn you profits.  Tip #2 Invest in large integrated oil and gas producers. These are the companies out there finding and producing crude oil. As the price for crude oil goes up, their share price should follow.
  14. 14. Visit us at DailyResourceHunter.comand sign up for our free daily e-letter toreceive access to our latest field reportsand today’s best resource opportunities. To watch this as a video presentation visit the link below