The American Petroleum Institute released information on March 16 outlining how gasoline prices are determined, highlighting the various components that contribute to what consumers pay at the pump.
Understanding the makeup of gasoline prices is important for consumers and policymakers, as fluctuations can impact household budgets and broader economic trends. The largest factor in retail gasoline pricing is the cost of crude oil, which is traded globally and responds to worldwide supply and demand.
According to the U.S. Energy Information Administration, as of November 2025, crude oil accounts for about 47 percent of the price at the pump. Refining costs make up around 16 percent, distribution and marketing about 20 percent, and federal and state taxes roughly 17 percent. Changes in global oil prices generally lead to changes in gasoline prices due to crude oil’s significant share of overall costs.
Other factors affecting crude oil prices include global supply and demand dynamics, decisions by major oil-producing countries, geopolitical events impacting supply chains, global inventories, transportation logistics, and market expectations regarding future conditions. Refining costs also vary based on seasonal fuel formulations, regional specifications aimed at reducing emissions, operational expenses at refineries, and blending requirements such as ethanol content. Gasoline demand typically rises during summer months when travel increases.
Distribution involves transporting gasoline from refineries to terminals and then to retail stations via pipelines or trucks. Marketing costs reflect station operations including labor, real estate taxes, distance from terminals, and local competition. Taxes further influence final prices: the federal tax stands at 18.4 cents per gallon while state taxes range widely—from about nine cents per gallon in Alaska to over seventy cents per gallon in California—averaging a combined total of approximately fifty-one cents per gallon nationwide.
Most gas stations are independently owned businesses; less than five percent are owned by major oil companies while more than half are operated by individual owners or families running a single store. Price changes occur frequently because crude oil trades daily on global markets affected by supply shifts or geopolitical developments. The American Petroleum Institute emphasized that no single company sets gasoline prices: “Gasoline prices are largely driven by global supply and demand, and the cost of crude oil…is set in global markets rather than by any single company.” Repeated investigations by the Federal Trade Commission have found that market conditions—not illegal manipulation—drive price changes.
