Tips to give consumers a good idea of why, when gas prices likely to increase

2014-02-27T00:00:00Z Tips to give consumers a good idea of why, when gas prices likely to increaseSubmitted By Valerie Vinyard AAA Arizona Arizona Daily Star
February 27, 2014 12:00 am  • 

It’s an oft-asked question: Why does gas cost so much?

When prices jump a dime or more per gallon over the course of a week, motorists often wonder how they could have seen it coming.

After all, sometimes the reasons behind gas prices increasing are simple. Other times it may be a bit more confusing.

In the coming weeks, prices are slated to spike in Arizona and around the nation, partly thanks to spring refinery maintenance.

“Last year, gas prices peaked in the spring rather than summer because refineries have bumped up their maintenance schedules,” said Linda Gorman, director of communications and public affairs for AAA Arizona. “We anticipate they’ll follow the same course this year.”

According to AAA Arizona, these are the five main reasons prices at the pump rise:

  • Exports: Global factors are affecting pump prices more than ever before. In fact, the United States now exports more gasoline, heating oil and diesel fuel than it imports, mainly because these refined products fetch a higher price on the global market. This keeps supply and prices artificially tight in the U.S. As a result, the American Petroleum Institute is considering a push to change a 1970s law that limits exports of domestic crude oil, which, if changed, could eventually cause more price hikes.
  • Demand: Supply and demand is a basic tenet of economics. While demand for fuel hasn’t necessarily increased in the U.S., demand has increased globally. This has led to price increases and sustained higher prices in the United States in recent years.
  • Refinery issues: Every refinery undergoes maintenance at least twice a year. Sometimes they need to shut down temporarily for repairs or because of harsh weather conditions. Generally, this causes supplies to tighten and fuel prices to increase. Arizona receives its fuel from both the east and west pipelines, so the state tends to be less affected by dramatic swings in price caused by refinery issues.
  • Crude oil prices: While there are a variety of factors that go into retail prices, the cost of crude oil is perhaps the most influential. It accounts for well over half — approximately 71 percent — of the cost of a gallon of gasoline. The price of crude shifts based on factors such as the global economy, geopolitical conflict, speculation and supply and demand. In recent years, activity within these factors has made the commodity extremely volatile. In fact, from 2004 to 2014, the price of crude oil has climbed more than 116 percent, according to the Energy Information Administration. Fuel generally tracks the price of oil. This means that when crude prices go up, retail prices follow suit.
  • Weather: Inclement weather typically impacts demand more than supply, unless it’s a significant scenario, like a hurricane, which causes refineries to go offline for weeks or months. When it comes to other types of storms, such as a blizzard, demand usually slows, which means fuel prices are less likely to be affected. However, during winter months, cold weather may cause the price of heating oil to rise, which has the potential to raise the commodity price as a whole, subsequently increasing gas prices.

Valerie Vinyard is a public affairs specialist with AAA Arizona. Contact her at vvinyard@arizona.aaa.com or 258-0518.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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