Driving the American economy

How are gasoline prices determined?

Not by us

The retail price of gasoline is impacted by many factors

The price of crude oil is the main determinant of the price of gasoline, but refining costs, federal, state and local taxes, as well as marketing and distribution costs also affect gasoline prices. The price of gasoline varies by state and region because of differences in gasoline specifications, state and local taxes, and costs to transport fuels into the state or region. 

The price of crude oil is determined in the global market
Crude oil is the primary input used to make gasoline, and as a result, the cost of crude oil has the most significant impact on the price of gasoline at the pump. The price of crude oil is determined in the global market, rather than by the refiner. That price is affected by global oil production levels (notably OPEC production but increasingly U.S. production); demand for all refined petroleum products like gasoline, diesel and jet fuel; the world economy; and geopolitics.
Other factors in the supply chain impact the price too

The price of gasoline is constantly changing. In 2019, the cost of crude oil accounted for 54% of the price of a gallon of gasoline. Refining costs and profits accounted for about 13% of what we paid at the pump. Refining costs include wages, equipment, financing, energy, and profits. Marketing and distribution adds another 15% to the retail price. Combined, federal and state taxes account for an average of 18% of the price of gasoline. Sales taxes along with taxes applied by local and municipal governments are also added and can have a significant impact on the price of gasoline in some locations.1

Did you know?
Many retail gasoline outlets fly the flag of a major oil company, but that does not mean the company owns or operates the retail outlet. About 95% of retail gasoline outlets are independently owned small businesses but many fly the flag of a major oil company because they have paid a fee to license that brand.

Factors Affecting Gas Prices