Who is setting the price for a gallon of gas, and what is their commission?

Question

If the oil companies aren't saying what they want to sell oil for, how are gas prices set? How are the high prices for gas justified, when all the speculations on lack of supply or a cut off of supplies are warrantless? The countries that are producing the oil aren't setting the prices for oil, either, and why would they want to cut off their country's predominant source of income by stopping production? So, what I really want to know is, who is setting the price for gas, and how much money are they making on the commissions?

Answer 1

There are 4 factors to the price of gas, which the price of crude oil being the largest component by far.

Crude oil prices are set by traders on the futures market (kind of similar to the stock market). They worry from possible disruptions in future supply and other things like that. The people who export oil, such as OPEC countries, make the most profit here. They may not be setting the price, but they make money. For example, if you buy a lot of stock and it goes up in price because the market went up, you may not have set the price, but you did make a lot of money.

There's also refining costs. Katrina knocked out some refineries in the Gulf Coast area, which was one of the major sources in the US. It affected prices at that time.

There's the government tax that makes up a significant portion of the cost. In some states, such as CA, it's one of the major reasons for a large increase in price.

The final portion is the profit made. It's typically around 10%, shared between the gas station owners and the oil companies.

There's a decent article here: http://www.npr.org/templates/story/story.php?storyId=5365439

Answer 2

the price of oil (used to make the gas and other products) is determined by supply and demand on the world's commodity markets. that means when lots of folks are speculating that the price will go up and then buy more, the price continues to go up and up *until* the majority of people are betting the price will go down and start to sell. then the price goes down. this happens every day on the exchanges so unless a gas station, airline, consumer or other buyer has a long term contract, they are stuck with paying what is available on the open market. the traders do make commission but they can bet wrong and lose their shirt if they make a bet and the market goes the other way.