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Gasoline is a product that is refined from crude oil, for use in automobiles, light trucks, recreational vehicles, fuel boats and other equipment.
Gasoline is usually produced constantly the year round while extra amounts of gasoline are made for
higher demanding summer season.
There are basically three grades of gasoline; regular, mid-grade and premium where each grade has its own octane level. The prices for different grades of fuel are different.
When pricing gasoline, many factors are taken into consideration in its pricing. Its cost includes the cost of transporting crude oil to refiners, the cost of refining the crude oil, the costs inferred in the marketing and distribution of fuel and of course, the retail station costs and respective taxes.
So in the end, the price that you find in the pump reflects a sum of all these costs, with the refiner’s, distributor’s, marketer’s and retail station owners’ profit taken into consideration.
Many a time gasoline prices tend to fluctuate even when the cost of crude oil is rather stable. The factors that contribute to the fluctuation of crude oil is usually the availability of crude oil and competition amongst retailers.
Sometimes world events and domestic problems like break downs or equipment outages in refinery and pipelines lead to rapid changes in gasoline prices, and in some cases war or civil uprisings.
Though the price of crude oil remains stable, the retail prices of gasoline tends to increase both before and during summer when there are more people driving. Similarly, the price of fuel tends to drop during winter when there are less people driving.
In fact, favorable weather for driving and holidays brings about a 5 percent hike in gasoline prices in most countries.
Crude oil rates are basically determined through its demand and supply in the world, which is considerably influenced by the Organization of Petroleum Exporting Countries (OPEC).
Ever since its inception, OPEC has aimed at maintaining the rates of world oil by setting upper production limits for its member nations. With its members having a major part of the supply of world’s oil; OPEC can influence the worldwide oil prices.
In addition to this, the increase in the gasoline demand and demand for refined crude products in the world has led to an increase in the rates of crude oil.
It should be remembered that world events like the Arab oil embargo of 1973, Iranian revolution of 1978, Persian Gulf conflict of 1990 and the Iran/Iraq war in 1980 all led to an increase in gasoline prices.
Similarly, production cuts in OPEC, chaos in countries that produce oil and related problems in the infrastructure of petroleum in a country all lead to a hike in gas rates.
With this reduction in supply, there is a hike in demand wherein wholesalers tend to quote higher rates for gas products. There is also an imbalance when vehicles in a region change over to another fuel type while providers have to make adjustments to meet the needs of the new product. And when gasoline supply is plentiful, its rates may drop only to increase when the supply reduces.
It is easy to see how gas rates experience fluctuations in its price, like all other commodities. However gas prices considered to be more volatile since consumers don't have much choice in being able to consider substituting other fuels in order to avoid the price fluctuations in gas rates.