Jane Van Ryan
Posted April 7, 2010
Crude oil prices stood at $86.84 per barrel when the market closed yesterday, marking their highest level since October 2008.
According to analysts, favorable economic news has pushed up global oil prices and has put upward pressure on gasoline prices. With 42 gallons in each barrel, the price of crude oil was $2.07 per gallon.
As the graph above illustrates, crude oil is the largest factor in the price of gasoline, followed by taxes, refining, transporting the fuel to your local service station and marketing expenses.
As we've reported, gasoline prices tend to track crude oil prices. Crude oil is traded on the New York Mercantile Exchange (NYMEX) and on other commodities markets where buyers around the world purchase oil contracts. Their bids help to determine the global price for crude oil.
Oil companies are considered "price takers," not "price makers." They do not set a price for the commodity. Rather the price is determined by the transactions that occur in the global marketplace.
Demand for gasoline has been rising during the past few months. It was 0.9 percent higher in January as compared to January 2009, and 2.2 percent higher in February this year over the same month last year. Also, gasoline production in January and February 2010 was the highest ever for those two months.
AAA reports that the average price of regular grade gasoline rose to $2.84 per gallon yesterday.
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