Crude Oil

• The gasoline that is pumped into cars begins as crude oil, which is sold by the barrel. The Organization of Petroleum Exporting Countries, or OPEC, sets prices for oil from its member countries. On average, the price of crude oil accounts for 50 percent of what the average American pays per gallon of gas.
  
  

Refinement

• For crude oil to become gasoline it must first be refined. This refining process is lengthy and expensive. This refining process accounts for about 28 percent of the cost of gasoline, depending on the grade of the crude oil and the time needed to refine the oil to make it usable.
  
  

Taxes

• The United States government places a tax on every gallon of gasoline sold. Many state and local governing bodies also levy their own taxes. All of these taxes combined increase the price of gasoline by approximately 14 percent. The amount of taxes imposed on gasoline varies greatly from state to state. For instance, the gas tax in Wisconsin is 32.1 cents per gallon, while in Georgia it is only 7.5 cents per gallon.
  
  

Advertising

• There are several gas companies, including Exxon-Mobil, Conoco Phillips and Chevron. Each one of these companies uses traditional advertising outlets, such as television, Internet and radio, to promote their products in an increasingly competitive market. All of these advertisements cost money to produce, and this translates into an increase in gas prices for consumers.
  
  

Transportation and Demand

• Once the crude has been gathered from the oil derricks it must be sent to the refineries. The gasoline then makes its way to distributors who then ship it to individual points of sale. The cost of this transportation has an effect on the price of gasoline at the pump. Demand also is a factor. For instance, there is more demand for gasoline during the summer than the winter because of increased travel. The higher the demand, the larger the price tag.