Gas prices have always been a hot discussion topic, especially as the costs continue to climb. For many, gas prices are just another point of frustration in a long list of economic and financial issues. Whether you’re a daily commuter, a small business owner or just someone on a strict budget, the impact of expensive gas is a problem for nearly everyone. Continue reading to learn more about what affects gas prices: the factors and how things could change in the future.
Since gas prices constantly fluctuate, it’s important to understand how they work and what affects them. Currently, the average price of gas in the United States is $3.785 per gallon, which is down 3.3% from the same time last year. National average aside, gas prices also fluctuate regionally due to different factors, including distance from the supply source, retail competition and operating costs. Currently, California has the highest gas prices in the country, while Georgia and Mississippi are tied for the lowest.
So, what affects gas prices so significantly that the cost varies so much? Two key reasons for high gas prices are reduced production and climate impact. Let’s dig into the topic of reduced production first.
One of the most significant factors that affects gas prices is reduced production. Saudi Arabia and Russia are major oil-producing nations and have reduced daily oil production by one million and 300,000 barrels, respectively. This has created a ripple effect on global gas prices as the battle between supply and demand is no longer balanced.
Climate-related events can also impact the price of gas. Areas with extremely high temperatures may experience grid energy overload, which impairs the tools refineries need to produce oil and can lead to supply shortages and higher prices at the pump. Additionally, hurricanes and tropical storms disrupt offshore operations, leading to production pauses and problems with meeting distribution demands.
Many people wonder how gas prices vary so much from location to location. It’s helpful to know what affects gas prices in different regions. Those factors include distance, competition, disruption and more. Let’s start with distance.
Areas that are further from major oil refineries or transportation hubs tend to have higher gas prices because it costs more to transport the fuel over these distances.
If there are several gas stations in close proximity, they may lower prices to attract more business against their competitors. On the other hand, if there are only a few stations, they’ll have less competition and won’t have the incentive to lower prices.
Additionally, operating costs will always vary by location regardless of the number of stations, leading to different prices.
Environmental regulations and programs can add to gasoline production, storage and distribution costs in certain areas. If you live in a place with strict environmental requirements, there may be an added cost for emissions control technology and cleaner fuel blends.
Another reason for high gas prices by location is supply disruptions. Situations like natural disasters, pipeline shutdowns or refinery outages interrupt the supply chain flow, leading to localized shortages and gas price increases.
In addition to the previously mentioned factors, what affects gas prices? Two big ones are refining changes and geopolitical events. Refineries typically switch from summer blend fuels to winter blends in the fall, with winter fuel being cheaper to produce. This is why gas prices tend to be higher in the spring and summer months but lower in the fall and winter.
When there are major political events or conflicts, like the ongoing war in Ukraine, it can also disrupt the global oil supply chain and cause gas prices to fluctuate.
So, what goes into determining the price we pay per gallon? While prices constantly fluctuate, they are typically set around a few main components, including:
Tracking these components can give you a better understanding of how they impact the overall gas prices in your area.
Now that we know what affects gas prices, there are a few things you can do to help mitigate the impact of rising gasoline prices and contribute to a more sustainable future.
As a driver, you can do various things to get the biggest bang for your buck at the pump. Some ideas include:
If you use your personal vehicle for work, it’s more important than ever to be reimbursed for gas and routine maintenance. Simply commuting to and from work unfortunately isn’t reimbursable, but using your vehicle to drive to service appointments or client meetings should be.
Fleet managers feel the pain of rising gas prices far more than the average consumer, and that only grows with the size of your fleet. The silver lining might be all of the credit card points that you’re accruing with the mounting gas bills, but that only counts if you’re the one who gets to redeem those points for a free vacation at the end of the year (and let’s face it, unless your job title starts with “chief” that’s probably not happening).
Just as vehicle reimbursements are critical for drivers in this rising gas prices environment, personal use chargebacks are becoming more important for fleet managers. Be sure to use a program like Motus fleet solutions to automatically track mileage and ensure employees are paying their fair share for using fleet vehicles for personal use outside of work and commuting. That way, you’ll have a little bit of extra cash to cover those skyrocketing gas bills and repair costs.
When you understand how gas prices work and the factors that affect them, you can make more sustainable and cost-effective decisions at the pump and on the road. Learn more about Motus vehicle solutions for drivers and fleet managers today.