🌅 What Goes into the Price of Gas

SOURCE

U.S. Energy Information Administration

WHAT TO KNOW

• The U.S. Energy Information Administration projects nationwide retail gas prices to average $4.30 in April, the highest monthly average of the year so far. The retail price is based on four things: the market price of crude oil (accounts for 51% of the retail price), the cost of refining crude into gasoline (20%), taxes levied (18%), and the cost of marketing and distributing gas to consumers (11%).

WHY IT MATTERS

• Since most of the retail price is based on crude oil, the price Americans pay at the pump is largely derived from the global market. Right now, experts say the market is responding to Trump’s war with Iran, which has caused severe shipping disruptions in the Strait of Hormuz and damage to Middle East oil infrastructure that has taken millions of barrels a day off the global market. Despite widely cited research showing swings in crude prices mainly come from changes in global demand and expectations, experts say what’s happening right now is one of the exceptions: a classic supply shock caused by war.

CONNECT THE DOTS

• Research shows measures intended to bring down the price of gasoline, like state tax holidays or federal waivers on shipping requirements, offer partial relief that is temporary at best and fundamentally risky at worst. Beyond policy, experts say the best way to combat rising gas prices is by driving a more fuel-efficient car or one that doesn’t burn gasoline at all.