Why do gas prices change on a daily basis?
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M$7 Answers
The reason gas prices are so volatile in the states is that gas is completely unregulated there. In other countries (i lived in Mexico for a while) gas is much more stable because when the price increases quickly, the govt. subsidizes it, and when it decreases, the govt. recoups its losses from subsidizing it. This way gas stations all pay the same amount for the gas no matter what the market rate is, and don't have to match another stations price
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M$Secondly the oil exporting cartel OPEC,but if you check out their website they have their own view largely fixes the gas prices mainly by controlling the number of barrels available in the open market. Thus not permitting the market to correct itself ideally the way it should if it were to strictly follow the rules of supply and demand..So that is the reason why you see them employ that convoluted logic of day to day gas price hikes inspite of the Buying Price of available stocks in their Depot. I hope this shades a light(literally) on the intrigues involved in fixing gas prices.
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M$change for many reasons. Many factors may cause gas prices to go up or
down, even if crude oil prices remain stable.
Seasonal Demands For Gas
Gas prices usually rise in the late spring and summer months because
the demand for it is greater. During the summer months people drive
more, they get out in the good weather, they go on vacation. It can go
up ten to twenty percent in the warmer time of year.
In winter gasoline prices usually go back down. Not many people are driving like they do in the summer so the demand is less.
Supply and Demand
If the use of gas powered vehicles increases the demand for the fuel
goes up. Usually when this happens it causes cost increases because of
the extra production costs involved in supplying the product. The
refineries have to work more to increase the supply, tankers and trucks
work more to get the gas from the refineries to the gas stations.
There are no options for consumers to replace gas with, so we must pay
the higher prices, because we are not able to switch to another type of
fuel.
Crude Oil
Usually when the cost of crude oil goes up, so goes gasoline. Since it
comes from the refining of crude oil, if the base product costs more,
so will the products produced from it. Crude oil prices can depend on
many things, such as production cuts, wars , problems with refineries
or pipelines, political problems in oil producing countries and weather
as we saw last year with the heavy hurricane season.
If OPEC (Organization of Petroleum Exporting Countries) cuts oil
production it greatly influences the world gasoline prices and supplies
because the countries in OPEC make up for at least forty percent of the
worlds oil production. Most of the world's oil supply is found in the
countries belonging to OPEC.
Only about 35 percent of the gasoline we use comes from the United
States. We rely heavily on foreign oil for most of our gas supply. We
are, therefore, at the mercy of many outside influences when it is
determined what our gas will cost.
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M$Again, the key driver of prices is that something about the expectation of the future price of oil has changed. For example, if the market thought that OPEC would cut oil production by 5% in March 2009, but all of a sudden tomorrow OPEC says they will increase production by 10% next week, the market will react and price this new information in. Again, in this example something about the expectation of future prices changed which drives the shift in the price of oil.
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M$
The long answer:
Gasoline and crude oil are both commodities. Commodities are usually bought and sold at prices that change daily. Something a little closer to home with a similar structure is the value of our dollar.
The wholesale price for gas changes daily and as a result, so do the prices at the pump. At least that's what economics will tell you.
Specifically, some of the variables that impact the wholesale price of gas on a daily basis include:
The cost to produce and deliver fuel to customers
Costs of crude oil
refinery processing
marketing and distribution
retail station operation
profits (and sometimes losses) of the refiners, marketers, distributors, and retail station owners.
and taxes.
A better scenario than the daily commodity market pricing might be for each gas station to purchase the gas that they need and then charge their customers a markup on that product. However, gas stations don't really own the gas until it's sold and as a result, even independently owned gas stations can't change the price.
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M$
1. Increase/decrease in demand for gas - The more people want gas the more it will cost and vice-versa.
2. Increase/decrease in production of gas - The more gas there is out there, the less it costs to get some and when there is less it costs more (when a tanker spills there might be a slight spike in prices).
3. Time of year/season - Gas prices will change accordingly by the season that they are in.
4. Competition between local gas stations - When stations compete they change their prices to try and outwit their competitors (One station may try to lower its prices to get more customers and set off a chain reaction).
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M$
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M$
