Gas Prices: Where Pump Costs Stand and What Sets Them

Gas prices are set by four stacked costs: crude oil, refining, distribution and marketing, and taxes. According to AAA, crude oil makes up about half the price of gasoline, with refining, distribution, marketing, and taxes accounting for the rest. That split explains why pump prices move with oil markets even when nothing changes at the local station. The number on the sign also reflects timing, not just cost. Stations price gasoline based on what it will cost to refill their tanks, not what the last delivery cost. That means today's pump price is partly a forecast of tomorrow's wholesale price. When drivers understand that mechanism, the weekly swings look less like price gouging and more like inventory accounting. What actually determines the price at the pump? Start with crude oil. It is the largest single component, and AAA puts it at roughly half of what a driver pays per gallon.

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