Energy
Explainer: What Drives Gasoline Prices?
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What Drives Gasoline Prices?
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Across the United States, the cost of gas has been a hot topic of conversation lately, as prices reach record-breaking highs.
The national average now sits at $5.00 per gallon, and by the end of summer, this figure could grow to $6 per gallon, according to estimates by JPMorgan.
But before we can have an understanding of whatโs happening at the pump, itโs important to first know what key factors influence gasoline prices.
This graphic, using data from the U.S. Energy Information Administration (EIA), outlines the main components that influence gasoline prices, providing each factorโs proportional impact on price.
The Four Main Factors
According to the EIA, there are four main factors that influence the price of gas:
- Crude oil prices (54%)
- Refining costs (14%)
- Taxes (16%)
- Distribution, and marketing costs (16%)
More than half the cost of filling your tank is influenced by the price of crude oil. Meanwhile, the rest of the price at the pump is split fairly equally between refining costs, marketing and distribution, and taxes.
Let’s look at each factor in more depth.
Crude Oil Prices
The most influential factor is the cost of crude oil, which is largely dictated by international supply and demand.
Despite being the worldโs largest oil producer, the U.S. remains a net importer of crude oil, with the majority coming from Canada, Mexico, and Saudi Arabia. Because of America’s reliance on imports, U.S. gas prices are largely influenced by the global crude oil market.
A number of geopolitical factors can influence the crude oil market, but one of the biggest influences is the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia.
Established in 1960, OPEC was created to combat U.S. dominance of the global oil market. OPEC sets production targets for its 13 member countries, and historically, oil prices have been linked to changes in OPEC production. Today, OPEC countries are responsible for about 60% of internationally traded petroleum.
Refining Costs
Oil needs to be refined into gasoline before it can be used by consumers, which is why refining costs are factored into the price of gas.
The U.S. has hundreds of refineries across the country. The countryโs largest refinery, owned by the Saudi Arabian company โโSaudi Aramco, processes around 607,000 barrels of oil per day.
The exact cost of refining varies, depending on a number of factors such as the type of crude oil used, the processing technology available at the refinery, and the gasoline requirements in specific parts of the country.
In general, refining capacity in the U.S. has not been keeping up with oil demand. Several refineries shut down throughout the pandemic, but even before COVID-19, refining capacity in the U.S. was lagging behind demand. Incredibly, there haven’t been any brand-new refining facilities built in the country since 1977.
Taxes
In the U.S., taxes also play a critical role in determining the price of gas.
Across America, the average gasoline tax is $0.57 per gallon, however, the exact amount fluctuates from state to state. Hereโs a look at the top five states with the highest gas taxes:
Rank | State | Gas tax (per gallon) |
---|---|---|
1 | California | $0.87 |
2 | Illinois | $0.78 |
3 | Pennsylvania | $0.77 |
4 | Hawaii | $0.77 |
5 | New Jersey | $0.69 |
*Note: figures include both state and federal tax
States with high gas taxes usually spend the extra money on improvements to their infrastructure or local transportation. For instance, Illinois doubled its gas taxes in 2019 as part of a $45 billion infrastructure plan.
California, the state with the highest tax on gas, is expecting to see a rate increase this July, which will drive gas prices up by around three cents per gallon.
Distribution and Marketing Costs
Lastly, the costs of distribution and marketing have an impact on the price of gas.
Gasoline is typically shipped from refineries to local terminals via pipelines. From there, the gasoline is processed further to ensure it meets market requirements or local government standards.
Gas stations then distribute the final product to the consumer. The cost of running a gas station variesโsome gas stations are owned and operated by brand-name refineries like Chevron, while others are smaller-scale operations owned by independent merchants.
The big-name brands run a lot of advertisements. According to Morning Consult, Chevron, BP PLC, Exxon Mobil Corp., and Royal Dutch Shell PLC aired TV advertisements in the U.S. more than 44,495 times between June 1, 2020, and Aug. 31, 2021.
How Does the Russia-Ukraine Conflict Impact U.S. Gas Prices?
If only a fraction of Americaโs oil comes from Russia, why is the Russia-Ukraine conflict impacting prices in the U.S.?
Because oil is bought and sold on a global commodities market. So, when countries imposed sanctions on Russian oil, that put a squeeze on global supply, which ultimately drove up prices.
This supply shock could keep prices high for a while unless the U.S. falls into a recession, which is a growing possibility based on how recent data is trending.
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Energy
Who’s Still Buying Fossil Fuels From Russia?
Here are the top importers of Russian fossil fuels since the start of the war.

The Largest Importers of Russian Fossil Fuels Since the War
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Despite looming sanctions and import bans, Russia exported $97.7 billion worth of fossil fuels in the first 100 days since its invasion of Ukraine, at an average of $977 million per day.
So, which fossil fuels are being exported by Russia, and who is importing these fuels?
The above infographic tracks the biggest importers of Russiaโs fossil fuel exports during the first 100 days of the war based on data from the Centre for Research on Energy and Clean Air (CREA).
In Demand: Russiaโs Black Gold
The global energy market has seen several cyclical shocks over the last few years.
The gradual decline in upstream oil and gas investment followed by pandemic-induced production cuts led to a drop in supply, while people consumed more energy as economies reopened and winters got colder. Consequently, fossil fuel demand was rising even before Russiaโs invasion of Ukraine, which exacerbated the market shock.
Russia is the third-largest producer and second-largest exporter of crude oil. In the 100 days since the invasion, oil was by far Russiaโs most valuable fossil fuel export, accounting for $48 billion or roughly half of the total export revenue.
Fossil fuel | Revenue from exports (Feb 24 - June 4) | % of total Russian fossil fuel export revenue |
---|---|---|
Crude oil | $48.3B | 49.4% |
Pipeline gas | $25.2B | 25.8% |
Oil products | $13.6B | 13.9% |
Liquified Natural Gas (LNG) | $5.4B | 5.5% |
Coal | $5.0B | 5.1% |
Total | $97.7B | 100% |
While Russian crude oil is shipped on tankers, a network of pipelines transports Russian gas to Europe. In fact, Russia accounts for 41% of all natural gas imports to the EU, and some countries are almost exclusively dependent on Russian gas. Of the $25 billion exported in pipeline gas, 85% went to the EU.
The Top Importers of Russian Fossil Fuels
The EU bloc accounted for 61% of Russiaโs fossil fuel export revenue during the 100-day period.
Germany, Italy, and the Netherlandsโmembers of both the EU and NATOโwere among the largest importers, with only China surpassing them.
Country | Value of fossil fuel imports from Russia (Feb 24 - Jun 4) | % of Russian fossil fuel export revenue |
---|---|---|
๐จ๐ณ China | $13.2B | 13.5% |
๐ฉ๐ช Germany | $12.7B | 12.9% |
๐ฎ๐น Italy | $8.2B | 8.4% |
๐ณ๐ฑ Netherlands | $8.2B | 8.4% |
๐น๐ท Turkey | $7.0B | 7.2% |
๐ต๐ฑ Poland | $4.6B | 4.7% |
๐ซ๐ท France | $4.5B | 4.6% |
๐ฎ๐ณ India | $3.6B | 3.7% |
๐ Other | $35.7B | 36.5% |
Total | $97.7B | 100% |
China overtook Germany as the largest importer, importing nearly 2 million barrels of discounted Russian oil per day in Mayโup 55% relative to a year ago. Similarly, Russia surpassed Saudi Arabia as China’s largest oil supplier.
The biggest increase in imports came from India, buying 18% of all Russian oil exports during the 100-day period. A significant amount of the oil that goes to India is re-exported as refined products to the U.S. and Europe, which are trying to become independent of Russian imports.
Reducing Reliance on Russia
In response to the invasion of Ukraine, several countries have taken strict action against Russia through sanctions on exports, including fossil fuels.ย
The U.S. and Sweden have banned Russian fossil fuel imports entirely, with monthly import volumes down 100% and 99% in May relative to when the invasion began, respectively.
On a global scale, monthly fossil fuel import volumes from Russia were down 15% in May, an indication of the negative political sentiment surrounding the country.
Itโs also worth noting that several European countries, including some of the largest importers over the 100-day period, have cut back on Russian fossil fuels. Besides the EUโs collective decision to reduce dependence on Russia, some countries have also refused the countryโs ruble payment scheme, leading to a drop in imports.
The import curtailment is likely to continue. The EU recently adopted a sixth sanction package against Russia, placing a complete ban on all Russian seaborne crude oil products. The ban, which covers 90% of the EUโs oil imports from Russia, will likely realize its full impact after a six-to-eight month period that permits the execution of existing contracts.
While the EU is phasing out Russian oil, several European countries are heavily reliant on Russian gas. A full-fledged boycott on Russiaโs fossil fuels would also hurt the European economyโtherefore, the phase-out will likely be gradual, and subject to the changing geopolitical environment.
Oil and Gas
How Affordable is Gas in Latin America?
This graphic looks at gas affordability in Latin America, showing how much a liter of gas costs in 19 countries, relative to average incomes.

How Affordable is Gas in Latin America?
As gas prices have risen around the world, not each region and country is impacted equally.
Globally, the average price for a liter of gas was $1.44 USD on June 13, 2022.
But the actual price at the pump, and how affordable that price is for residents, varies greatly from country to country. This is especially true in Latin America, a region widely regarded as one of the worldโs most unequal regions in terms of its income and resource distribution.
Using monthly data from GlobalPetrolPrices.com as of May 2022, this graphic by Latinometrics compares gas affordability in different countries across Latin America.
Gas Affordability in 19 Different Latin American Countries
To measure gas affordability, Latinometrics took the price of a liter of gas in 19 different Latin American countries and territories, and divided those figures by each countryโs average daily income, using salary data from Statista.
Out of the 19 regions included in the dataset, Venezuela has the most affordable gas on the list. In Venezuela, a liter of gas is equivalent to roughly 1.3% of the countryโs average daily income.
Country | Gas price as of May 2022 (USD) | % of average daily income |
---|---|---|
๐ณ๐ฎ Nicaragua | $1.37 | 14.0% |
โ๐ฉ๐ดโ Dominican Republic | $1.41 | 12.6% |
๐ง๐ทโ Brazil | $1.43 | 12.5% |
๐ต๐พโ Paraguay | $1.39 | 12.2% |
๐ต๐ช Peru | $1.53 | 10.2% |
๐บ๐พ Uruguay | $1.92 | 9.8% |
๐ธ๐ปโ El Salvador | $1.14 | 9.2% |
โโ๐ญ๐ณโ Honduras | $1.33 | 8.6% |
๐ฒ๐ฝโ Mexico | $1.17 | 7.8% |
๐ฌ๐นโ Guatemala | $1.44 | 7.7% |
๐ฆ๐ท Argentina | $1.06 | 6.7% |
โ๐จ๐ฑโ Chile | $1.37 | 6.6% |
๐จ๐ทโ Costa Rica | $1.42 | 5.9% |
๐จ๐ด Colombia | $0.58 | 5.7% |
โ๐ต๐ฆ โPanama | $1.27 | 5.0% |
๐ช๐จ Ecuador | $0.67 | 4.1% |
๐ง๐ด Bolivia | $0.54 | 3.2% |
๐ต๐ทโ Puerto Rico | $1.35 | 2.2% |
๐ป๐ชโ Venezuela | $0.02 | 1.3% |
This isn’t too surprising, as Venezuela is home to the largest share of proven oil reserves in the world. However, itโs worth noting that international sanctions against Venezuelan oil, largely because of political corruption, have hampered the once prosperous sector in the country.
On the other end of the spectrum, Nicaragua has the least affordable gas on the list, with one liter of gas costing 14% of the average daily income in the country.
Historically, the Nicaraguan government has not regulated gas prices in the country, but in light of the current global energy crisis triggered in large part by the Russia-Ukraine conflict, the government has stepped in to help control the situation.
As the Russia-Ukraine conflict continues with no end in sight, itโll be interesting to see where prices are at in the next few months.
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