After an emergency, such as a hurricane or tornado, some gas stations may raise gas prices to levels that are very high, unreasonable, and unfair. This is called price gouging and it is illegal. If you believe that you are a victim of price gouging, contact your state attorney general.
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Reasons for Changes in Gas Prices
Have you ever wondered why gas prices at your local gas station change over the months, or why the price of gas in your city is different from prices across the country? Several factors affect the price you pay at the pump for gas.
Crude Oil Prices
The biggest factor that impacts gas prices is the price of crude oil. Crude oil is the main ingredient for the gas that you use in cars. People around the world need crude oil for their transportation needs, but there is a limited supply available. When the demand for this oil increases or if there is a shortage in the amount available (due to natural disasters or political unrest in the areas that produce the oil), then the price of fuel for your car may also increase.
Refineries and Transportation
After companies drill for crude oil, they refine it or put it through several chemical processes so that it can be turned into fuel for your car. The refined crude oil is then transported to each region of the country through pipelines and tanker trucks. The refining and transporting costs are passed on to you.
Many oil refineries are in the southern part of the U.S., near the Gulf of Mexico. Since it costs more to transport the fuel farther distances, the gas prices in the states that are farther away may be higher than the gas prices in states that are closer to the refineries.
In the late spring and summer months, there are more steps involved in the refining of the crude oil that makes it more expensive. The higher costs of refining often lead to higher gas prices, especially in the summer. Some states also require additional chemicals to be included in the fuel that is sold in their state, to protect the environment. The cost of adding these ingredients during the refining process may cause the price of gas to be higher in those states.
Taxes also affect the cost of gas. The price per gallon of gas includes taxes from federal, state, county and city governments. There can be differences in gas prices because of the state and local taxes.
There are also price differences because of local factors. In areas with few gas stations, gas prices tend to be more expensive than in areas with several stations nearby. Each gas station operator is responsible for paying rental costs, franchising fees, staff salaries, and other business expenses. The difference in these business costs can be the cause of the price differences between stations, even if they are near each other. You may also pay lower prices at some stations, if they sponsor loyalty programs or cents off of the gallon promotions, often with local grocery retailers. You may also pay lower prices at some stations by paying with cash instead of a debit or credit card. Find the lowest gas prices in your area, using Fueleconomy.gov's gas price tool.
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