Gas prices in the United States are high enough to make older people suddenly remember the shortages of the 1970s. However, they are low enough to signal “good times” for some. The United States is an extremely large country. It is also extremely diverse when it comes to population concentrations, natural resource proximity, and legislative boundaries.
Most people understand that the price of gasoline at the pump is intimately tied to the price of crude oil on the open market. Huge fluctuations in the price of consumer gasoline is partially determined by crude prices. Gas prices are also influenced by a host of other factors. Presently, average gasoline prices are moderately high, but they are relatively inconsequential when compared to other inflationary factors.
Monitoring Oil Prices
The United States purchases crude oil from many regions of the world. It also produces an incredible amount of oil domestically. In fact, there is now a glut of oil now sitting in storage and refinery facilities throughout the United States. With this glut, many consumers wonder why gasoline prices seem a bit high.
The oil-to-gas refining process is relatively simple. Prices at the pump do not only reflect the cost of refining. Prices include transportation costs, government agency regulatory costs, and a host of state and local taxes. These factors do not make it easy to correlate oil extraction and trade values with the prices paid at the pumps.
In general, consumers who live in close proximity to oil refining facilities enjoy lower gasoline prices. This is due to fewer trucking expenses, and local governments realizing that industry profits are more beneficial than optional taxes. Gasoline costs are higher in locations that are far from refining facilities. Not only are there more shipping fees, but legislative bodies in these areas view gas as a more taxable commodity. This is why perennially lower gas prices are seen in places like states bordering the Gulf of Mexico. It is also why interior mountain states often deal with the highest prices.
Market Pace and Locale Designation
Gasoline is a byproduct of the crude oil market. Volumes of gas are purchased by companies at certain rates, and they are sold in order to make a profit. This is why oil prices can sink, but certain areas still see high gas prices. Gasoline purchases must cycle according to wholesale purchases in order to reflect the greater oil market.
Still, gas stations must pass along taxes to the consumer. Gas taxes vary widely across the United States. These taxes are compounded by state, city, and other legislative bodies. Also, gas prices can be determined by the individual seller. Multiple levels of corporate and legislative actions can make gasoline prices seem as though they are not connected to the crude oil market.
Perception of US Gas Prices
Gasoline price percentages change far more rapidly than things like housing prices and income earnings. Slight changes in gas prices can create larger financial burdens to the average consumer because they seem somewhat arbitrary. However, US gas prices are far less volatile than prices in other countries. Though US gas consumption demands are the highest in the world, fluctuations in prices happen relatively slowly.
The current condition of US gas prices is moderately stable. Domestic reserves are high. This is creating a need for oil companies to market their product in a relatively inexpensive way. Volatile fluctuations in prices at the pump are mainly due to changes in state and local tax codes. In many areas of the country, seasonal gas increases continue to be a financial burden. This is mainly due to a stalling in income increases in the same areas. The vast majority of US consumers can still purchase gas in large volumes relatively cheaply when compared to income. This remains true even though the global oil market swings erratically each day.