What Drives Gasoline Prices?
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 what’s happening at the pump, it’s 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 factor’s 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 world’s 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.
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 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.
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. Here’s a look at the top five states with the highest gas taxes:
|Rank||State||Gas tax (per gallon)|
*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 varies—some 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 America’s 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.
Visualizing the World’s Largest Hydroelectric Dams
Hydroelectric dams generate 40% of the world’s renewable energy, the largest of any type. View this infographic to learn more.
Visualizing the World’s Largest Hydroelectric Dams
Did you know that hydroelectricity is the world’s biggest source of renewable energy? According to recent figures from the International Renewable Energy Agency (IRENA), it represents 40% of total capacity, ahead of solar (28%) and wind (27%).
This type of energy is generated by hydroelectric power stations, which are essentially large dams that use the water flow to spin a turbine. They can also serve secondary functions such as flow monitoring and flood control.
To help you learn more about hydropower, we’ve visualized the five largest hydroelectric dams in the world, ranked by their maximum output.
Overview of the Data
The following table lists key information about the five dams shown in this graphic, as of 2021. Installed capacity is the maximum amount of power that a plant can generate under full load.
|🇨🇳 China||Three Gorges Dam||Yangtze River||22.5||181 x 2,335|
|🇧🇷 Brazil / 🇵🇾 Paraguay||Itaipu Dam||Parana River||14.0||196 x 7,919|
|🇨🇳 China||Xiluodu Dam||Jinsha River||13.9||286 x 700|
|🇧🇷 Brazil||Belo Monte Dam||Xingu River||11.2||90 X 3,545|
|🇻🇪 Venezuela||Guri Dam||Caroni River||10.2||162 x 7,426|
At the top of the list is China’s Three Gorges Dam, which opened in 2003. It has an installed capacity of 22.5 gigawatts (GW), which is close to double the second-place Itaipu Dam.
In terms of annual output, the Itaipu Dam actually produces about the same amount of electricity. This is because the Parana River has a low seasonal variance, meaning the flow rate changes very little throughout the year. On the other hand, the Yangtze River has a significant drop in flow for several months of the year.
For a point of comparison, here is the installed capacity of the world’s three largest solar power plants, also as of 2021:
- Bhadla Solar Park, India: 2.2 GW
- Hainan Solar Park, China: 2.2 GW
- Pavagada Solar Park, India: 2.1 GW
Compared to our largest dams, solar plants have a much lower installed capacity. However, in terms of cost (cents per kilowatt-hour), the two are actually quite even.
Closer Look: Three Gorges Dam
The Three Gorges Dam is an engineering marvel, costing over $32 billion to construct. To wrap your head around its massive scale, consider the following facts:
- The Three Gorges Reservoir (which feeds the dam) contains 39 trillion kg of water (42 billion tons)
- In terms of area, the reservoir spans 400 square miles (1,045 square km)
- The mass of this reservoir is large enough to slow the Earth’s rotation by 0.06 microseconds
Of course, any man-made structure this large is bound to have a profound impact on the environment. In a 2010 study, it was found that the dam has triggered over 3,000 earthquakes and landslides since 2003.
The Consequences of Hydroelectric Dams
While hydropower can be cost-effective, there are some legitimate concerns about its long-term sustainability.
For starters, hydroelectric dams require large upstream reservoirs to ensure a consistent supply of water. Flooding new areas of land can disrupt wildlife, degrade water quality, and even cause natural disasters like earthquakes.
Dams can also disrupt the natural flow of rivers. Other studies have found that millions of people living downstream from large dams suffer from food insecurity and flooding.
Whereas the benefits have generally been delivered to urban centers or industrial-scale agricultural developments, river-dependent populations located downstream of dams have experienced a difficult upheaval of their livelihoods.
– Richter, B.D. et al. (2010)
Perhaps the greatest risk to hydropower is climate change itself. For example, due to the rising frequency of droughts, hydroelectric dams in places like California are becoming significantly less economical.
What are the Benefits of Fusion Energy?
One of the most promising technologies, fusion, has attracted the attention of governments and private companies.
What are The Benefits of Fusion Energy?
As the world moves towards net-zero emissions, sustainable and affordable power sources are urgently needed by humanity.
One of the most promising technologies, fusion, has attracted the attention of governments and private companies like Chevron and Google. In fact, Bloomberg Intelligence has estimated that the fusion market may eventually be valued at $40 trillion.
In this infographic sponsored by General Fusion, we discuss the benefits of fusion as a clean energy source.
The Ultimate Source of Energy
Fusion powers the sun and the stars, where the immense force of gravity compresses and heats hydrogen plasma, fusing it into helium and releasing enormous amounts of energy. Here on Earth, scientists use isotopes of hydrogen—deuterium and tritium—to power fusion plants.
Fusion energy offers a wide range of benefits, such as:
1. Ample resources:
Both atoms necessary for nuclear fusion are abundant on Earth: deuterium is found in seawater, while tritium can be produced from lithium.
Energy-dense generation like fusion minimizes land use needs and can replace aging infrastructure like old power plants.
There are no CO₂ or other harmful atmospheric emissions from the fusion process.
With limited expected regulatory burden or export controls, fusion scales effectively with a small land footprint that can be located close to cities.
5. Safety advantage
Unlike atomic fission, fusion does not create any long-lived radioactive nuclear waste. Its radiation profile is similar to widely used medical and industrial applications like cyclotrons for cancer treatment.
Fusion energy is on-demand and independent from the weather, making it an excellent option in a dependable portfolio for power generation.
Commercializing Fusion Energy
More than 130 countries have now set or are considering a target of reducing emissions to net-zero by 2050. Meanwhile, global energy demand is expected to increase by 47% in the next 30 years.
While renewables like wind and solar are intermittent and need a baseload source of clean energy to supplement them, fusion, when commercially implemented, could deliver clean, abundant, reliable, and cost-competitive energy.
General Fusion seeks to transform the world’s energy supply with the most practical path to commercial fusion energy. Click here to learn more.
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