How Gasoline Prices Are Determined

How Gasoline Prices Are Determined

Gasoline prices reflect costs across the fuel supply chain-from crude oil production to refining, distribution and retail sales. The largest factor is the price of crude oil, which is traded in global markets. Refining costs, distribution and marketing expenses, and federal and state taxes also contribute to the price drivers ultimately pay at the pump.

According to the U.S. Energy Information Administration (Nov 2025), the retail price of gasoline typically reflects four main components:

• Crude oil (about 47%)
• Refining (around 16%)
• Distribution and marketing (about 20%)
• Federal and state taxes (roughly 17%)

Because crude oil represents nearly half the price of gasoline, changes in global oil prices have generally translated into changes in gasoline prices.

The Four Main Drivers of Gasoline Prices

Crude Oil Prices

Crude oil is the largest component in the retail price of gasoline. Oil is traded in global markets, meaning prices respond to worldwide supply and demand rather than production in any single country. When crude oil prices have risen or fallen, gasoline prices have generally followed.

Factors that influence crude oil prices include:

• Global supply and demand
• Production decisions by major oil-producing countries
• Geopolitical developments affecting supply
• Global oil inventories
• Transportation to bring product to market
• Market expectations about future supply and demand/li>

Refining Costs

Refineries convert crude oil into gasoline and other petroleum products. Refining costs reflect the cost of crude oil used in the refining process and the expenses associated with operating refineries to produce gasoline.

These costs vary due to:

• Seasonal gasoline formulations (summer vs. winter blends)
• Regional fuel specifications designed to reduce emissions
• Energy and operational costs at refineries
• Blending components such as ethanol

Gasoline demand typically increases during the summer driving season when many Americans go on vacation, which can also place upward pressure on prices.

Distribution and Marketing

Once gasoline is produced, it must be transported from refineries to fuel terminals and eventually to retail gas stations.

Distribution costs may include transportation by pipeline, marine vessel, rail or tanker truck. From storage terminals, gasoline is delivered by truck to individual stations.

Marketing costs reflect the expenses associated with operating the gasoline station such as fuel and labor costs, real estate taxes, distances from the terminal to the station and competition with other stations.

Taxes

Federal, state and local taxes also contribute to gasoline prices.

• The federal gasoline tax is 18.4 cents per gallon
• State gasoline taxes vary widely, ranging from roughly 9 cents per gallon in Alaska to more than 70 cents per gallon in California

On average, state taxes add about 33 cents per gallon, bringing the combined federal and state average to roughly 51 cents per gallon. Some states and municipalities also apply additional sales taxes or local fuel taxes.

Frequently Asked Questions

Who owns gas stations and sets prices?

Most gas stations in the United States are independently owned businesses. Prices at individual stations are influenced by a range of factors, including the cost-or anticipated cost-of the next fuel delivery, labor and operating expenses, transportation costs and local taxes.

There are roughly 155,000 retail fuel stations in the United States, according to the National Association of Convenience Stores. When a station carries a particular fuel brand, it does not necessarily mean the refiner owns or operates it-most branded stations are owned and operated by independent retailers licensed to sell fuel under that brand. Less than 5% of gasoline stations are owned by major oil companies, while about 55% are owned by individual operators or families who operate a single store.

Why do gas prices change so often?

Gasoline prices change frequently because crude oil, the largest component of gasoline prices, is traded in global markets where prices move daily based on supply, demand and geopolitical developments.

Retail stations may also adjust prices based on changes in wholesale gasoline prices and local competition.

Do oil companies control gas prices?

No single company sets gasoline prices. Gasoline prices are largely driven by the global price of crude oil, the primary ingredient used to make fuel.

Retail gasoline prices can also vary locally depending on factors such as transportation costs, operating expenses and state or local fuel taxes.

Are oil companies raising prices or engaging in price gouging during the conflict?

No. Gasoline prices are largely driven by global supply and demand, and the cost of crude oil, the largest component of gasoline prices, is set in global markets rather than by any single company. Repeated investigations by the Federal Trade Commission have found that changes in gasoline prices are driven by market conditions rather than illegal price manipulation.

Why are gas prices different in different states?

Gasoline prices vary across the country due to differences in fuel taxes, regional fuel specifications, transportation costs, local supply and demand and operating costs for gas stations.

If the U.S. produces so much oil, why do events in the Middle East still affect gas prices here?

Oil is traded on a global market, so events that threaten supply in major producing regions can push oil prices higher worldwide.

Record U.S. oil and natural gas production has added significant supply to global markets, helping strengthen energy security and cushion consumers from some of the volatility caused by geopolitical disruptions.

Last updated: March 2026