Jane Van Ryan
Posted November 3, 2010
Are you planning a trip during the upcoming Thanksgiving Day holiday? For those of us in the Washington, D.C. area, the Wednesday before Thanksgiving is the single busiest day on surrounding highways during the entire year.
There's little doubt that travelers will be watching gasoline prices as they plan their trips, and some will wonder why prices have been higher this fall than one year ago. The answer is simple: Gasoline prices tend to track crude oil prices, and the cost of crude oil has increased by nearly $10 a barrel in recent weeks.
There are several factors that influence the price of gasoline, but the most important is the cost of crude oil. Gasoline is refined from crude oil, and the cost of crude is determined in the global marketplace.
On November 1, a benchmark crude oil on the New York Mercantile Exchange (NYMEX) ended the trading day at $82.88 per barrel. Since there are 42 gallons in a barrel, that equates to a per-gallon price of $1.97. To determine the pump price of gasoline, one must add the cost of refining; the federal, state and local taxes; and the cost of transporting and marketing the gasoline to consumers. In general, the price of gasoline has averaged about 94-97 cents a gallon higher than the cost of crude oil.
In recent weeks, crude oil prices have trended upward. On September 21, the cost of crude oil was $73.52 per barrel, which translates to $1.75 a gallon. From Sept. 21 to Nov. 1, the cost of crude climbed 22 cents. Gasoline prices rose on average by 11 cents over the same time period.
Gasoline prices can vary from locality-to-locality and state-to-state due to market conditions, different tax rates, and a host of other reasons. For the week ending November 1, the average U.S. retail price for all grades of gasoline was $2.861 per gallon, according to the Energy Information Administration (EIA). That figure was 0.9 cents lower than the previous week. EIA also reports that the price of regular grade gasoline fell from the prior week by 1.1 cents to $2.806 per gallon.
The International Energy Agency (IEA) has been forecasting record worldwide demand for crude oil in 2010, due primarily to economic growth in countries overseas. As global demand rises, it is incumbent on U.S. policymakers to protect U.S. energy security by encouraging the exploration and production of U.S. oil supplies for American consumers.
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