Pricelock | About Commodities

About Commodities, Specifically Fuel

In the past 5 years, there has been a constant increase of the price of gas in the United States.

5 Factors that Affect Fuel Volatility

The United States accounts for 44% of the world’s gasoline consumption and in our markets the greatest percentage of the cost of a gallon is the actual cost of oil, rather than taxes. As such the price at the pump fluctuates based both on the underlying price of crude and factors that impact refined product supply. The key factors driving prices include:

1 Global Demand for Crude

The increasing demand for crude oil and refined products from developing countries, such as China and India, is increasing the price of gasoline, diesel and all petroleum-based products in the United States.

2 Domestic U.S. Refinery Capacities and Pipeline Dependence

Refineries have a limit to their capacity even when running at full production and in full operation and very few new refineries have been built in the last 25 years. Intermittent refinery shut downs caused by required repairs, accidents or other factors along with periodic pipeline outages can unexpectedly drive up the price at the pump.

3 Climate Change

It has been suggested that global warming and climate change will increase the frequency of significant hurricanes in key oil producing and refining regions of the United States. Events such as Hurricane Katrina can have broad sweeping effects on the prices of fuel nationwide and weather issues outside the United States can also impact fuel prices in the U.S.

4 Speculation

Capital and physical products markets respond to the latest information available that impact the supply and demand of fuel. Speculators can substantially impact available supply and demand of product and therefore prices.

5 Geopolitics

War, changes in governments and their policies, and international politics all play a part in the cost of fuel.

Automotive fuel is not the only commodity that has experienced huge increases in price and volatility. In due course, Pricelock will develop unique, similar solutions for many of these commodities.

For more Information

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