Gas prices have been a significant topic of conversation over the past couple of years. This rise in interest is because they have been fluctuating so significantly. We’ve seen prices soar higher than ever before, then dip relatively low, only to climb very high again. For a fleet, these fluctuations are highly stressful. It may leave you wondering: why is this happening? What are the factors impacting fuel prices? Let’s discuss fuel cost influencers to understand what’s going on.
What Determines the Retail Price of Fuel?
There are four factors to consider when discussing the retail price of fuel, and the U.S. Energy Information Administration has broken down how much each element contributes as of 2022.
- The cost of crude oil [57.1%]
- The cost of refining and profits [17.7%]
- Taxes [12.8%]
- Expenses associated with distribution, marketing, and profits [12.4%]
Let’s discuss these factors in detail to learn how each plays a role.
Crude Oil Costs
As you can see above, crude oil prices are the most consequential contributor to the price of gasoline in the U.S. These costs vary significantly over time and across different regions of the country. Oil prices are driven by three major factors: supply, demand, and geopolitics. All three elements are highly volatile and can change at any time. This volatility is the primary reason we see so many changes in gas prices.
Crude oil costs aren’t the only costs that vary. On the surface, refining gas in California should cost the same as it does in Texas. However, it varies considerably based on the type of crude oil used and the technology available at the plant where it is refined. Available ingredients and their prices also affect the price of the final product. It even varies based on what time of year the gasoline is refined. For example, it costs more to produce gasoline in the summer than in the winter because demand is higher.
Gasoline is subject to federal, state, and local taxes. The federal gasoline tax is 18.4 cents per gallon. Of course, state taxes vary based on where you are, and local taxes are even more specific. Sales taxes can significantly impact how much you pay for gasoline, depending on your location.
Distribution and Marketing Costs
Of course, gas isn’t refined at your local gas station. It must be transported from the refinery via pipeline and trucks to its selling point. Some gas retailers are owned directly by the refineries, and third parties own others. Gas prices at a particular location may depend on the station’s owner’s marketing strategy, employee wages and benefits, equipment costs, or other location-specific factors. Areas with lots of competition may have lower prices, while you may see significantly higher prices in more rural areas.
Save on Gas with Azuga
When it comes to saving on fuel, take action before you get to the pump. Azuga’s comprehensive fleet management software helps you cut off fuel waste at every angle. Route planning software, driver behavior monitoring, and maintenance alerts help you eliminate inefficiencies and put your fuel to work for you so you get the most bang for your buck. Learn more about how Azuga can help you save money on fuel by speaking with one of our experts.
Reducing Fuel Costs by Increasing Safety – Feb. 24th, 2023
Learn new strategies to reduce fuel costs by prioritizing safety. Discover how safe driving practices and efficient vehicle maintenance can improve fuel efficiency and implement measures such as driver training, vehicle inspections, and technology solutions. These will help you enhance safety and lower fuel expenses, ultimately maximizing cost savings for your fleet.
The Ultimate Guide to Fleet Fuel Management – May 25th, 2022
Gather these insights on fleet fuel management with this comprehensive guide. Learn practical strategies to optimize fuel efficiency, reduce costs, and enhance operational performance. These tips on fuel tracking, driver behavior monitoring, maintenance best practices, and technology solutions will help you streamline your fleet's fuel management processes and achieve tangible results.
Do Fuel Prices Rise in Summer? – May 2nd, 2023
Learn about the factors influencing fuel price fluctuations and how they relate to the summer season. Discover strategies to mitigate the impact of rising fuel costs, including efficient driving techniques, proper vehicle maintenance, and leveraging technology solutions for fuel management to optimize your fleet's fuel efficiency and budget.