What makes Fuel Prices change so often?
It is hard not to notice that the price of gasoline, diesel, and other petroleum products change so quickly. Sometimes multiple times a day! We have developed special practices to help you save more. It is tricky work for sure, but you are well worth it! There are a lot of things to take into account, and here are a few of them:
Price of Crude Oil
A large part of the price is influenced by the price of crude oil. All other petroleum based products are made from this product. Sold by the barrel, the price fluctuates depending on how much is produced. A majority of the crude oil extracted is done by members of the Organization of Petroleum Exporting Countries (OPEC). While it is the decision of the individual country on what they produce and price, OPEC provides guidance based on supply and demand.
Extreme Weather or Political Events & Demand
Hurricanes, floods, earthquakes, and more all have a way of disrupting the extraction, transportation, refining, and distribution of crude oil and its products. Political events also have a great deal of influence. Conflicts, political negotiations, social movements, government taxes and regulations have historically caused disruptions. These events are generally unpredictable and are harder to prepare for. Due to the high reliance on petroleum products on every industry, it is often difficult to build up a large enough amount in storage to avoid the necessary spike in pricing when supplies run short. A lack of demand can also cause the price to drop. A most recent example has been the pandemic. With a majority of people staying home, less driving was occurring, and thus, less demand and lower fuel prices.
Refining Costs
The cost of refining crude oil into usable petroleum products varies by region and even season. Due to regulations that define how products are produced, some states have higher costs associated with the production of fuel products. In addition, some regions that encounter seasonal weather patterns will change the production formulation. For example, during the winter an easier to burn formulation would be produced while in the summer, a more efficient formulation is made.
Futures Market
Crude oil is sold and bought in what is called a ‘futures market’. These types of transactions create what is known as a contract in which the buyer agrees to purchase the product for a certain price at a certain date. This allows purchasers to ‘lock-in’ on a price today and securing a quantity of product.
R.H. Foster Energy has developed Budget plans that help to shield you from unpredictable prices. Visit our budgets page for more information, or give us a call and we can help craft a budget plan just for you!