If you’re like most people, you probably think about gas prices more now than you ever used to. You might be wondering why they’re going up and down so much, or what’s causing them to change. In this blog post, we’ll give you 16 facts about gas prices that will help you understand them better. We’ll also explain what causes changes in gas prices, and offer some tips for saving money at the pump.
16 Things You Should Know About Gas Prices
Gas prices are at an all-time high, and there’s no end in sight. Here are 16 things you should know about gas price inflation:
1. Gasoline is Sold and Priced By Grade
The price of gasoline is determined by its grade, which is set by the American Society for Testing and Materials (ASTM). There are three main grades of gasoline sold in the United States, although you can find 85 octane in some locations:
- Regular Unleaded– 87 octane
- Mid-grade Unleaded– 89 octane
- Premium Unleaded– 91 or higher octane
2. Gas is Sold Based on Octane Levels
Octane is a measure of a gasoline’s ability to resist “knocking” or “pinging” during combustion, caused by the air/fuel mixture detonating prematurely in the engine.
The higher the octane rating, the more resistant the fuel is to knocking.
Detonation can cause engine damage, so most automakers recommend using gasoline with an octane rating that matches or exceeds the level recommended for their vehicles by the manufacturer.
3. The Difference Between Gas is the Octane Rating
The main difference between regular unleaded gasoline and premium unleaded gasoline is the octane rating.
- Premium gasoline has a higher octane rating than regular gasoline, which means it’s less likely to cause knocking or pinging during combustion.
- Regular Unleaded gasoline has an octane rating of 87 in most locations, while premium Unleaded gasoline has an octane rating of 91 or higher.
4. The Retail Price of Gasoline Includes Four Main Components
The retail price of gasoline includes four main components of cost or expense:
- Crude oil- The cost of crude oil is the largest single component of the retail price of gasoline.
- Refining– Refining costs account for about 10 to 15 percent of the retail price of gasoline.
- Distribution and marketing– Distribution and marketing costs account for about 10 to 20 percent of the retail price of gasoline.
- Federal and state taxes– Federal and state taxes account for about 18 to 20 percent of the retail price of gasoline.
5. Crude Oil Prices are the Biggest Factor in Gas Prices
The price of crude oil is the largest single component in the retail price of gasoline, accounting for about 60 to 70 percent of the price. The price of crude oil is determined by global supply and demand. Changes in the price of crude oil can have a big impact on gas prices. For example, when crude oil prices increase, gas prices usually increase as well.
6. Refining Costs are the Second Largest Factor in Gas Prices
Refining costs account for about 10 to 15 percent of the retail price of gasoline. Refining is the process of converting crude oil into gasoline and other petroleum products. The cost of refining varies depending on the type of crude oil being used, the efficiency of the refinery, the octane to be achieved, and other factors.
7. Distribution and Marketing Costs are the Third Largest Factor in Gas Prices
Distribution and marketing costs account for about 10 to 20 percent of the retail price of gasoline. Distribution costs include the cost of shipping gasoline from refineries to gas stations. Marketing costs include the cost of advertising and promoting gasoline to consumers.
8. Federal and State Taxes are the Fourth-Largest Factor in Gas Prices
Federal and state taxes account for about 18 to 20 percent of the retail price of gasoline. The federal gasoline tax is 18.4 cents per gallon, and the average state tax is 20.5 cents per gallon.This tax is usually designated to be used for the building and maintenance of our freeways and roads
9. The United States Banned Russian Oil Imports
The United States banned oil imports from Russia in response to Russian aggression in Ukraine. This means the global supply is also being squeezed.
10. The United States is the World’s Largest Oil Producer
The United States is the world’s largest oil producer, and it produces more oil than it needs. However, we actually export more oil than we use.
11. The United States is the World’s Largest Oil Consumer
The United States is the world’s largest oil consumer. We consume more oil than any other country, and our consumption has been increasing in recent years.
12. Gas Prices Have Been High in the Past
While gas prices are high right now, they have been almost as high in the past. In 2008, gas prices reached a record high at the time of $4.11 per gallon. Yes, they seem to be soaring higher, currently, and we saw an increase this week right before the Memorial Day Holiday weekend.
Prices tend to increase at this time each year in anticipation of higher demand with the summer vacation and air travel months ahead. Hopefully, we’ll see some factors eventually come into play that will lower the cost at the pump.
13. Gas Prices Fluctuate
Depending on what’s going on in the world the price of gasoline fluctuates. For example, gas prices tend to increase when there is turmoil in the Middle East because that’s where a lot of oil is produced. The challenges in Ukraine have certainly prompted some of the price increases we are seeing. Also, the supply chain fluctuations from the lockdowns and labor issues are still influencing how oil gets from the well to your tank and the costs to do so.
14. Legislation and policy Can Affect Gas Prices
Federal and state policies can affect gas prices. For instance, the United States’ ban on oil imports from Russia has contributed to higher gas prices. There are also different attitudes and pressures to open or close well locations, what can be drilled in offshore oil lease locations, and do we want to build more pipelines for transportation of the oil.
15. Cyclical Patterns Affect Gas Prices
There are cyclical patterns in gas prices. Prices tend to go up in the summer because more people are driving and there is increased demand for gasoline. Prices may also tend to go up in those very cold winter months because of increased demand for heating oil.
16. Natural Disasters Can Affect Gas Prices
Natural disasters can also affect gas prices. For example, Hurricane Katrina caused gas prices to spike in 2005 because it disrupted the production and distribution of gasoline.
Tips for Saving Money at the Gas Pump
Here are some tips for saving money at the gas pump:
1. Use Ethanol Free Gasoline
Ethanol-free gasoline is made without the addition of ethanol, which can damage small engines. Ethanol-free gasoline typically costs a few cents more per gallon than regular gasoline, but it can save you money in the long run by preventing engine damage.
Additionally, ethanol burns quicker which means you have to put more in your gas tank than if you buy it without ethanol.
2. Check Your Tire Pressure Regularly
Under-inflated tires can reduce fuel economy by up to 3 percent. Make sure to check your tire pressure regularly and inflate them to the proper level.
3. Use the AC Sparingly
The air conditioner puts an extra load on the engine, which reduces fuel economy.
4. Shop Around For the Best Price
Gas prices can vary from one gas station to the next, so it pays to shop around for the best price. You can also visit websites like GasBuddy that track and report where gas is the cheapest.
5. Use a Gas Rewards Credit Card
There are a number of gas rewards credit cards that give you lower prices at the pump, cash back, or points for every gallon of gas you purchase.
6. Fill Up Your Tank in the Morning
If you’ve ever filled up your gas tank first thing in the morning, you may have noticed that the gas seemed a bit denser than usual. In fact, gas is denser in the morning due to the cooler temperatures overnight. This means that you actually get more gas for your money when you fill up in the morning! However, as the day goes on and the temperature rises, the gas expands and becomes less dense. So if you’re looking to save money on gas, it’s best to fill up early in the day.
7. Don’t Let Your Tank Get Below Half Full
Keeping your tank above half full helps prevent condensation from forming in the tank and water from getting into the fuel line. This means that you will use less gas if you keep your gas tank full. Read Why You Should Keep Your Gas Tank Full for more information.
8. Use Rewards Cards
Many gas stations offer rewards programs that give you discounts on gas or other perks for loyalty. If you frequently fill up at the same gas station, it may be worth signing up for their rewards program.
9. Stock Up on Gas
If you see gas prices start to drop, it may be worth stocking up on gas so that you have a reserve in case prices go back up.
How to Store Gas
If you plan on stocking up on gasoline in the future, it’s crucial that you store it correctly. Not only can gas be a safety hazard, but without proper storage, it can be unusable. Here are a few tips to help you make sure your gas stays fresh:
- Store gas in a cool, dry place. Heat and moisture can cause gas to degrade, so it’s important to keep it away from those elements.
- Use the right gas storage container. If you are storing gas long-term, I recommend using a 5-Gallon Galvanized Steel Flammable Safety Can or for more gas storage, a 30-Gallon Gas Caddy.
- Make sure your storage container is clean and well-sealed. Any dirt or debris in the container can contaminate the gas, so it’s important to start with a clean slate.
- Add a fuel stabilizer to your gas before storing it. This will help prevent degradation and keep your gas fresh for up to two years.
- Be cautious when filling your tank right after the gas station storage tanks have been filled. Over time, the large tanks can get debris that builds up, and when the tanks are filled the debris is stirred up and is pumped into your tank if not given time to settle. If you see a tanker truck at your favorite gas station, I’d suggest filling elsewhere or coming back later.
Gas prices are a major factor in the cost of living, and they can have a big impact on your budget. By understanding how gas prices are determined and using the tips above, you can save money at the pump. May God Bless this world, Linda