Business Economics Project
Karen Loving
GM545- Business Economics
Spring II Session 2010
&
The price of gasoline is definitely impacted by the principle of supply and demand.
Consumers today use more oil causing an increase in the demand for oil, thus
causing the price of gas to increase for consumers. (Consumers, 2008). There is usually
an increase in demand between May and September which increases the price consumers
pay during the summer driving season. Since there is usually a decline in the demand for
gas during the winter months, the price tends to also decrease during this season.
Although demand plays an integral role in gas prices, research shows that there are four
main factors that influence the price of gas consumers pay at the pump.
The cost of crude oil is a factor which accounts for 55% of the price of gas.
(Accounts, 2010). OPEC, an organization of 12 oil producing countries, produce
approximately 46% of the world’s oil, was formed to regulate supply and to some
extent, the price of oil. (OPEC, 2010). How much crude oil is being bought and sold
for is attributed to 50% of the price of gas consumers pay. (Crude, 2010). The less crude
oil produced, the price of gas will increase. A higher supply produced, there tends to be a
decrease in the price of gas. Refining costs, cost of distribution, and taxes are also major
factors that influence the price of gas. Federal, state, and local taxes can sometimes
account for 19% of the price consumers pay ; however, this number changes continuously
and is based on the price of crude oil. (Federal, 2010). Taxes and distribution generally
influence approximately 45% of gas prices. (Taxes, 2010) Since distribution and taxes are
usually stable, the daily change in gas prices basically reflects the fluctuation in oil
prices. Occasionally, distribution lines are disrupted by weather related or natural
GM545- Business Economics
Spring II Session 2010
&
The price of gasoline is definitely impacted by the principle of supply and demand.
Consumers today use more oil causing an increase in the demand for oil, thus
causing the price of gas to increase for consumers. (Consumers, 2008). There is usually
an increase in demand between May and September which increases the price consumers
pay during the summer driving season. Since there is usually a decline in the demand for
gas during the winter months, the price tends to also decrease during this season.
Although demand plays an integral role in gas prices, research shows that there are four
main factors that influence the price of gas consumers pay at the pump.
The cost of crude oil is a factor which accounts for 55% of the price of gas.
(Accounts, 2010). OPEC, an organization of 12 oil producing countries, produce
approximately 46% of the world’s oil, was formed to regulate supply and to some
extent, the price of oil. (OPEC, 2010). How much crude oil is being bought and sold
for is attributed to 50% of the price of gas consumers pay. (Crude, 2010). The less crude
oil produced, the price of gas will increase. A higher supply produced, there tends to be a
decrease in the price of gas. Refining costs, cost of distribution, and taxes are also major
factors that influence the price of gas. Federal, state, and local taxes can sometimes
account for 19% of the price consumers pay ; however, this number changes continuously
and is based on the price of crude oil. (Federal, 2010). Taxes and distribution generally
influence approximately 45% of gas prices. (Taxes, 2010) Since distribution and taxes are
usually stable, the daily change in gas prices basically reflects the fluctuation in oil
prices. Occasionally, distribution lines are disrupted by weather related or natural
References: Worldwide Web. www.factsonfuel.org. Retrieved May 3, 2010. Worldwide Web. www.financialnut.com/simp-economics-demand-and-supply-affect- gas-prices. Retrieved May 3, 2010. Stone, Gerald W. (2008). Core Economics. New York, NY: Worth Worldwide Web. http://socyberty.com/issues. Retrieved May 7, 2010. Worldwide Web. www.sparknotes.com/economics. Retrieved May 7, 2010.