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Explainer: What Key Factors Influence Gas Prices?

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The Four Factors that Influence U.S. Gas Prices

Explainer: What Key Factors Influence Gas Prices?

Across the United States, the cost of gas has been a hot topic of conversation lately, as prices reach record-breaking highs.

The national average now sits at $5.00 per gallon, and by the end of summer, this figure could grow to $6 per gallon, according to estimates by JPMorgan.

But before we can have an understanding of what’s happening at the pump, it’s important to first know what key factors dictate the price of gas.

This graphic, using data from the U.S. Energy Information Administration (EIA), outlines the main components that influence gas prices, providing each factor’s proportional impact on price.

The Four Main Factors

According to the EIA, there are four main factors that influence the price of gas:

  • Crude oil prices (54%)
  • Refining costs (14%)
  • Taxes (16%)
  • Distribution, and marketing costs (16%)

More than half the cost of filling your tank is influenced by the price of crude oil. Meanwhile, the rest of the price at the pump is split fairly equally between refining costs, marketing and distribution, and taxes.

Let’s look at each factor in more depth.

Crude Oil Prices

The most influential factor is the cost of crude oil, which is largely dictated by international supply and demand.

Despite being the world’s largest oil producer, the U.S. remains a net importer of crude oil, with the majority coming from Canada, Mexico, and Saudi Arabia. Because of America’s reliance on imports, U.S. gas prices are largely influenced by the global crude oil market.

A number of geopolitical factors can influence the crude oil market, but one of the biggest influences is the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia.

Established in 1960, OPEC was created to combat U.S. dominance of the global oil market. OPEC sets production targets for its 13 member countries, and historically, oil prices have been linked to changes in OPEC production. Today, OPEC countries are responsible for about 60% of internationally traded petroleum.

Refining Costs

Oil needs to be refined into gasoline before it can be used by consumers, which is why refining costs are factored into the price of gas.

The U.S. has hundreds of refineries across the country. The country’s largest refinery, owned by the Saudi Arabian company ​​Saudi Aramco, processes around 607,000 barrels of oil per day.

The exact cost of refining varies, depending on a number of factors such as the type of crude oil used, the processing technology available at the refinery, and the gasoline requirements in specific parts of the country.

In general, refining capacity in the U.S. has not been keeping up with oil demand. Several refineries shut down throughout the pandemic, but even before COVID-19, refining capacity in the U.S. was lagging behind demand. Incredibly, there haven’t been any brand-new refining facilities built in the country since 1977.

Taxes

In the U.S., taxes also play a critical role in determining the price of gas.

Across America, the average gasoline tax is $0.57 per gallon, however, the exact amount fluctuates from state to state. Here’s a look at the top five states with the highest gas taxes:

RankStateGas tax (per gallon)
1California$0.87
2Illinois$0.78
3Pennsylvania$0.77
4Hawaii$0.77
5New Jersey$0.69

*Note: figures include both state and federal tax

States with high gas taxes usually spend the extra money on improvements to their infrastructure or local transportation. For instance, Illinois doubled its gas taxes in 2019 as part of a $45 billion infrastructure plan.

California, the state with the highest tax on gas, is expecting to see a rate increase this July, which will drive gas prices up by around three cents per gallon.

Distribution and Marketing Costs

Lastly, the costs of distribution and marketing have an impact on the price of gas.

Gasoline is typically shipped from refineries to local terminals via pipelines. From there, the gasoline is processed further to ensure it meets market requirements or local government standards.

Gas stations then distribute the final product to the consumer. The cost of running a gas station varies—some gas stations are owned and operated by brand-name refineries like Chevron, while others are smaller-scale operations owned by independent merchants.

The big-name brands run a lot of advertisements. According to Morning Consult, Chevron, BP PLC, Exxon Mobil Corp., and Royal Dutch Shell PLC aired TV advertisements in the U.S. more than 44,495 times between June 1, 2020, and Aug. 31, 2021.

How Does the Russia-Ukraine Conflict Impact U.S. Gas Prices?

If only a fraction of America’s oil comes from Russia, why is the Russia-Ukraine conflict impacting prices in the U.S.?

Because oil is bought and sold on a global commodities market. So, when countries imposed sanctions on Russian oil, that put a squeeze on global supply, which ultimately drove up prices.

This supply shock could keep prices high for a while unless the U.S. falls into a recession, which is a growing possibility based on how recent data is trending.

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Misc

Visualizing Global Aluminum Production

China dominates global production with nearly 60% share.

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Voronoi graphic of aluminum production in 2023.

Visualizing Global Aluminum Production

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

This infographic shows estimated aluminum smelter production by country in 2023, based on data from the most recent U.S. Geological Survey (USGS) Mineral Commodity Summaries, published in January 2024 .

From this data, we can see that China leads as the top producer, accounting for nearly 60% of the world’s smelter capacity. Its neighbor India is the second-largest producer, making only a tenth of China’s output.

Country2023 Aluminum Smelter Production (tonnes)% of total
🇨🇳 China41,000,00059%
🇮🇳 India4,100,0006%
🇷🇺 Russia3,800,0005%
🇨🇦 Canada3,000,0004%
🇦🇪 United Arab Emirates2,700,0004%
🇧🇭 Bahrain1,600,0002%
🇦🇺 Australia1,500,0002%
🇳🇴 Norway1,300,0002%
🇧🇷 Brazil1,100,0002%
🌍 Rest of the World9,460,00014%
Total69,560,000100%

Responsible for 5% of global aluminum output, Russia has been targeted by recent sanctions from the U.S. and the UK.

The sanctions include prohibiting metal-trading exchanges from accepting new aluminum produced by Russia and barring the import of the Russian metal into the U.S. and Britain. The actions are aimed at disrupting Russian export revenue amid Moscow’s ongoing invasion of Ukraine.

The World’s Most Common Metal

Aluminum is the primary material used for making cans, foil, and many other products. It originates from bauxites, rocks composed of aluminum oxides, and various minerals.

Approximately 25% of annually produced aluminum is utilized by the construction industry, while another 23% is allocated to vehicle frames, wires, wheels, and other components within the transportation sector. Aluminum foil, cans, and packaging constitute another significant end-use category, accounting for 17% of consumption.

Despite its extensive use, aluminum is still plentiful. Aluminum is the world’s most common metal by crustal abundance, making up 8.2% of the Earth’s crust.

According to the USGS, global resources of bauxite are estimated to be between 55 billion and 75 billion tonnes and are sufficient to meet world demand for metal well into the future.

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Misc

Brass Rods: The Sustainable Choice

Brass rods can help cut emissions in machine shops, be recycled without losing properties, and contribute to a cleaner environment.

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Teaser of bar chart and pie chart highlighting how brass rods can reduce emissions in machine shops, be recycled without losing properties, and contribute to a cleaner environment.

Brass Rods: The Sustainable Choice

Brass rods have a powerful lineup of green attributes, making them the sustainable choice for manufacturers and end-users of precision machined and forged parts.

This infographic, from the Copper Development Association, shows how brass rods can reduce emissions in machine shops, be recycled without losing properties, and contribute to a cleaner environment.

The Brass Rod Circular Economy

The metallurgical properties of brass allow pre- and post-consumer sources of brass scrap to be recycled with no loss in properties.

Brass scrap can retain over 90% of the original material value. In addition, brass doesn’t need energy-intensive processing, unlike steel and aluminum, which must be smelted and refined before being recycled into new products.

As a result, there is a greater chance that steel and aluminum scrap will end up in landfills.

Most brass-rod alloys produced in North America contain 95% or higher recycled content.

Closed-loop recycling of brass keeps this valuable engineering material out of landfills, reducing the need for new mines and all the environmental impacts that entails.

Higher Machinability Leads to Lower Operational Carbon Emissions

Machinability is how easily a material can be worked using cutting processes. It directly impacts the amount of energy required to produce finished parts.

With typical machine shops producing millions of parts each year, the carbon impact can be significant.

Here’s how brass and steel compare when manufacturing complex parts using computer numerical control (CNC) machining.

MaterialBrassSteel
TypeFree-cutting brass (C36000)Free-cutting steel (12L14)
Maximum machinability rating (0-100)10021
Metal Removal Rate (cubic inches per minute)0.2380.114
Time to remove material (hours)161,111336,111
Energy required to produce parts (kilowatt-hour)9,47518,931

In this example, using brass represented a savings of 3,510 kg in carbon dioxide (CO2).

The significantly longer tool life enabled by brass also reduces the need for new cutting tools, further decreasing emissions.

High recycled content and exceptional machinability make brass rods the sustainable choice for manufacturers and end-users seeking to reduce their environmental footprint and support the transition to a low-carbon future.

Explore the advantages of brass rod solutions.

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