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The Causes Of Rising Gasoline Prices
The most visible of all consumer prices are the gasoline prices. They are prominently displayed by all the gas station. As a result, consumers are highly sensitive to changes in price. Such changes translate into anxiety when the price rises. It is important for a layperson to understand the causes of price fluctuations. |
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Many of the factors that affect price volatility, like world supply and demand, are largely outside the control of the federal government. There are, however, federal regulations that put an upward pressure on gasoline prices and increase price volatility.
The components that form the price of gasoline include the following:
- The price of crude oil, the input, accounts for 45 percent of the total cost of gasoline.
- Federal and state gasoline taxes account for 23 percent of the cost.
- The refining costs account for 22 percent.
- Marketing and distribution costs account for 10 percent of the total cost of gasoline.
- Factors that effect the changes in the price of gasoline are:
- Changes in the price of crude oil.
- Transparency of energy markets
- The regulations that affect the price of gasoline. These regulations include prohibitions on exploration. The resulting proliferation of fuel bends to comply with federal clean air regulation (also known as boutique fuels), and the regulations that impede the construction of additional refining and pipeline capacity.
- Other extraneous factors like long-term projections of supply and demand.
- Political considerations like wars in strategic places, or the decisions of oil cartels.
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