What makes prices go up and down?
The price you pay for gasoline at your local service station can vary based on the type of gas, regional taxes, the level of competition, the amount that outlet sells, and the type and location of stations.
When demand for crude oil increases and supply decreases, the price of gas increases. Another factor is price retail margins, which is the distribution margin that represents the difference between the pump price and the acquisition cost. This also includes the operating cost and expenses of a service station which vary from region to region.
Unlike the above factors that are difficult to control and that characterize the extensive oil market, the various taxes that are added to a litre of gasoline are consistent. After the price of crude oil, taxes represent the second highest component of the pump price.
Other factors
There are many other things that influence the price of gas since crude oil and refined gas are traded on commodities markets. Factors that can influence the pump price include:
- Seasonal changes
- Weather conditions
- Increased demand
- Geopolitical conflict
- Status of oil and gas reserves
- Refining capacity
- Value of the US dollar
For more details, visit Natural Resources Canada for more details on the fluctuation of gas prices here.
