What influences gas prices? Expert says it’s not always crude oil costs rising the price

Published: Feb. 21, 2023 at 9:01 AM CST
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LUBBOCK, Texas (KCBD) - In Lubbock, the cheapest you can buy gas is $2.79, according to GasBuddy. Crude oil prices are currently around $76 per barrel. Converted to gallons, this is about $1.81 per gallon.

Marshall Watson, the department chair of Bob L. Herd Department of Petroleum Engineering at Texas Tech, says the rest of what consumers pay falls into three parts - one of those is taxes.

“Texas is roughly 20 cents a gallon on gasoline taxes, the national average is around 50 and if you look at California, I think their tax is around 82 cents a gallon,” Watson said.

Watson referenced an article on Elements, saying taxes influence 16% of the price of gas. Watson says the cost of making gas could be to blame for higher prices.

“So, it has to reside in the refining, and marketing and distribution costs,” Watson said.

Several refineries have closed, creating problems within the industry, according to Watson.

“Refining has been under a huge attack as far as EPA regulations and several refiners have shut down,” Watson said.

He wants to emphasize oil companies do not set the price of gas. It is traded on the New York Mercantile Exchange.

“It’s a commodity, so the traders on Wall Street are going to trade the price up,” Watson said. “So, I think more than anything, it’s a commodity issue, it’s what Wall Street thinks the price is going to be.”

He adds, Diesel has another reason for costing more. The cheapest diesel in Lubbock is $3.49, according to GasBuddy.

“A lot of the crude oil that’s really good for making diesel comes from Canada, and with the Keystone Pipeline being shut down, then we’re kind of in a shortage of that type of crude oil that makes diesel,” Watson said.

Watson says over the past few years, gas prices seem to stay around double of the price of crude oil.