Improving Gas Mileage – What Determines Gas Prices

    Published: 06-16-2009
    Views: 16,648
    AAA discusses the four main factors that go into the price of a gallon of gas.

    John Nielsen: Hi! I am John Nielsen with AAA Approved Auto Repair. Everybody wants to save a little bit of money on gas and frequently they wonder what controls the price of gasoline.

    Well, really there are four main factors that go into the price of a gallon of gas. The first is crude oil, which represents about 70% of the cost of a gallon of gasoline. Now, crude oil is a commodity that's traded on the open market and its price can fluctuate based on supply and demand, based on speculation, based on global unrest.

    The second greatest contributor to the cost of gasoline is taxes, which on a nationwide basis represent about 13% of overall cost. That can vary from municipality to municipality, but nationwide 13%. 11% of the cost of a gallon of gasoline is actually for the refining process of the fuel and this is where you take the crude oil and turn it into gasoline. The distribution and marketing of the gasoline make up the final 9%. So, these are the factors that contribute to the cost of gasoline at the pump.