As so many millions depend on gasoline every day, the real-life concept of fluctuating gas prices is a matter of huge concern for the masses. This life-blood of modern function keeps plains in the air, cars on the road, small engines running, and the commercial, residential, and industrial worlds all alive and functioning. By no means a mere fluke, fluctuating gas prices are dependent on a few fluctuating variables for their own ups and downs. For those interested in learning more, here are five factors that specifically affect the price experienced at the pump.
Crude Oil Production
The production of crude oil greatly dictates gasoline prices as it is this product that is used to make gasoline. When crude production is up, gas prices fall, and when crude production falls, the price of gas rises. Crude oil production itself is affected greatly by a number of other factors including OPEC and Non-OPEC supply trends, current inventories, world prices, and financial markets.
At the pump, we can directly experience the woes and gleeful accomplishments of the crude oil industry alike. This is directly through price. This relationship of factors, though highly explored, is unbreakable and will always be.
Geopolitical Factors
Politics can often seem to play a part in everything with due time. The world of gasoline prices is certainly of no exception. Here, politics can completely dictate prices directly and indirectly. There is a lot at stake and the forces of gasoline can be used therein via all types of diplomacy.
War, for example, can disturb production, refining, transport, and market stability. So too can embargoes, sanctions, and other acts of defiance set in place by feuding governments. In times of peace and good relations, gasoline prices are undoubtedly the lowest and most stable.
Supply and Demand Differences
Per the official Encyclopedia Britannica, supply and demand is the “relationship between the quantity of a commodity that producers wish to sell at various prices and the quantity that consumers wish to buy.” This concept is actually one of the prime deciders of prices in any commodity. This is especially true in the energy markets such as the gasoline market. If there is lots of energy to go around, its value is not so high. When supplies are limited however, buyers are willing to pay more, and prices end up climbing proportionately.
Transport Disruptions
Above, we mentioned the effects of geopolitical factors such as war and embargoes on gas price fluctuations. Part of the reason these factors are so impactful to gas prices is the fact that they affect supply and demand via transport disruption. Other examples of transport disruptions can include transport company strikes and employee problems, transport vehicle failures, porting problems, customs-clearing issues, shipping lane changes, and more. If the ultimate transport of the fuel is affected, so too is supply and demand and, in turn, price volatility at the pump.
Natural and Human-Engineered Disasters
Disasters, whether natural or human-engineered, can affect all types of fuel related factors. Supply and demand, geopolitical movements and status, unhindered transportation, and production can all be affected by a disaster. The larger the disaster, the more factors that can be affected in this way. When these factors are affected adversely, the reaction is an adverse effect at the pump. Prices will therefore climb at a speed dependent on the scale of such factors affected by the scope of the disaster at hand.
Gas prices are important to us all. From business endeavors and function, to the personal pursuits of the average citizen, the price we pay for gas affects more in our lives than what simply meets the eye at an outward glance. The above, five factors are some of those that really drive fluctuating gas prices either skyward or downward.
Recommended: Top 10 Best Online MBA Programs
