The People of America's Oil and Natural Gas Indusry

Prices at the Pump Explained

Jane Van Ryan

Jane Van Ryan
Posted May 29, 2009

For Americans filling up at the pump, making sense of gasoline prices can be confusing. Here's a simple explanation: the price of crude oil is the main factor in determining the price of gasoline.

Since April 20, 2009, the price of crude oil has climbed 46 cents a gallon, and the price of gasoline has risen 41 cents a gallon.

For more information about the impact of crude oil on the price of gasoline, take a look at the dollar bill graphic below.

20090529 - Dollar bill.jpg

Also factored into the pump price are refining, marketing and transportation costs, and taxes. In fact, every time U.S. motorists pull up to the pump, they pay nearly 46 cents in taxes per gallon of gasoline.

Other factors --such as demand, gasoline inventory and import levels, and the effect of weather on production and refinery operations--also play a part in retail gasoline prices.

Occasionally, fluctuating pump prices bring accusations of price gouging, but numerous federal and state agencies have investigated the causes of price spikes for decades and consistently have found that the markets and the factors mentioned above are responsible for price fluctuations. America's oil and natural gas industry is monitored daily by U.S. Federal Trade Commission (FTC), other federal agencies and state Attorneys-General frequently conduct investigations.

Oil and natural gas earnings are in line with the average of other major U.S. manufacturing industries. In the first quarter of 2009, oil and natural gas earnings averaged 5.7 cents per dollar of sales as compared with 6.0 cents per dollar for U.S. manufacturing--excluding the financially challenged auto industry.

Read more about where your gasoline dollars go as well as oil and natural gas company earnings.

ABOUT THE AUTHOR

Jane Van Ryan was formerly senior communications manager and new media advisor at the American Petroleum Institute (API), where she wrote blog posts and produced podcasts and videos. Before coming to API, Jane managed communications for a large science and engineering corporation, and for a top-tier research and engineering university. A few years ago, you might have seen her in your living room when she delivered the news on television. Jane officially retired from API in 2011 and now freelances as an independent communications consultant when not gardening at her farm in Virginia.