Pump Prices

The blogosphere is scratching its collective head this week about gasoline prices. The big question has been, "If oil prices have been falling, why have gasoline prices gone up?"

The answer is simple: supply and demand. As API's Monthly Statistical Report for January explains, gasoline demand increased last month for the first time in 12 months, and the nation's refiners produced record amounts of gasoline to keep up with the demand.

Also, since 2001 the price of a gallon of gasoline has been about 98-99 cents higher than the price of a gallon of crude oil, which has averaged about 97 cents a gallon in 2009. When added together, they reflect the average pump price of gasoline. The pump price includes the cost of the crude oil, taxes (about 45 cents a gallon on average), transportation, refining, marketing and other costs.

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