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How Gas Prices Are Determined

 

 

The price of gas goes up every summer and the profit of oil companies go up just as Americans are getting ready to travel during the warmer months. It’s not coincidental that rising fuel prices coincide with increased travel by Americans. The price of gas is based on supply, demand, inflation, and taxes.

The basic rules of supply and demand affect gas prices. Oil comes out of the ground in different forms in different places. Light/sweet crude oil is usually in the highest demand. As oil thickens, it has more impurities and takes longer to refine into gasoline.

As the supply of this preferred oil becomes more challenging, the price increases. In contrast, heavy/sour crude is easily available all over the world so the price is less. Obviously, the number of people who are using the gas to drive affects the demand.

 

In the near future, as gas prices increase or decrease, demand will most likely be inelastic. Car drivers only make little alterations in their consumption of gas when there are significant changes in the price. Over time and on the individual level. we can expect to see a movement toward lower fuel consumption. On the worldwide level, more people will depend on gasoline. These changes will affect the prices we pay at the pump. On top of gasoline prices being determined by the supply and demand of crude, several other plays a role as well. The taxes in some countries can add a substantial increase in the price of gasoline. Inflation also results in higher gas rising.

If you have any questions about gas prices or inquiries about auto repair, contact us at Mast Service center to schedule an appointment. We're  located at 8608 North State Road 19 in Etna Green, IN 46524.

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