Gas prices have been a significant topic of conversation over the past couple of years. This rise in interest is because they have been fluctuating so significantly. We’ve seen prices soar higher than ever before, then dip relatively low, only to climb very high again. For a fleet, these fluctuations are highly stressful. It may leave you wondering: why is this happening? What are the factors impacting fuel prices? Let’s discuss fuel cost influencers to understand what’s going on.
What Determines the Retail Price of Fuel?
There are four factors to consider when discussing the retail price of fuel, and the U.S. Energy Information Administration has broken down how much each element contributes as of 2022.
- The cost of crude oil [57.1%]
- The cost of refining and profits [17.7%]
- Taxes [12.8%]
- Expenses associated with distribution, marketing, and profits [12.4%]
Let’s discuss these factors in detail to learn how each plays a role.
Crude Oil Costs
As you can see above, crude oil prices are the most consequential contributor to the price of gasoline in the U.S. These costs vary significantly over time and across different regions of the country. Oil prices are driven by three major factors: supply, demand, and geopolitics. All three elements are highly volatile and can change at any time. This volatility is the primary reason we see so many changes in gas prices.
Refining Costs
Crude oil costs aren’t the only costs that vary. On the surface, refining gas in California should cost the same as it does in Texas. However, it varies considerably based on the type of crude oil used and the technology available at the plant where it is refined. Available ingredients and their prices also affect the price of the final product. It even varies based on what time of year the gasoline is refined. For example, it costs more to produce gasoline in the summer than in the winter because demand is higher.
Taxes
Gasoline is subject to federal, state, and local taxes. The federal gasoline tax is 18.4 cents per gallon. Of course, state taxes vary based on where you are, and local taxes are even more specific. Sales taxes can significantly impact how much you pay for gasoline, depending on your location.
Distribution and Marketing Costs
Of course, gas isn’t refined at your local gas station. It must be transported from the refinery via pipeline and trucks to its selling point. Some gas retailers are owned directly by the refineries, and third parties own others. Gas prices at a particular location may depend on the station’s owner’s marketing strategy, employee wages and benefits, equipment costs, or other location-specific factors. Areas with lots of competition may have lower prices, while you may see significantly higher prices in more rural areas.
Save on Gas with Azuga
When it comes to saving on fuel, take action before you get to the pump. Azuga’s comprehensive fleet management software helps you cut off fuel waste at every angle. Route planning software, driver behavior monitoring, and maintenance alerts help you eliminate inefficiencies and put your fuel to work for you so you get the most bang for your buck. Learn more about how Azuga can help you save money on fuel by speaking with one of our experts.
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