For December, another
simple answer to another frequently asked question about the petroleum
Why do oil companies raise the price of gasoline
right before a holiday?
Short answer: It's supply and demand.
"The oil industry does not raise prices. The marketplace
raises prices. As demand exceeds supply, prices always rise," said
Dan Gilligan, president of the Petroleum Marketers Association of
Okay, you'd expect him to say that. Look at it this
way. People tend to buy and use more gasoline during a holiday.
Gasoline retailers know this.
The rule for petrol stations is: You don't want to
run out of gasoline. So gasoline retailers stock up on petrol before
holidays. With retailers clamoring for supply, the price shoots
Retailers know that consumers will demand more gasoline
over the holiday period, which increases the price at the pump.
When demand falls, the price goes back down.
Increases before the summer holidays also result
from higher seasonal demand. According to the Energy Information
Administration, summer gasoline demand averages about 6 percent
higher than the rest of the year.
BONUS HOLIDAY QUESTION
How much gasoline comes from a barrel of crude oil?
Short answer: It depends.
A barrel of oil equals 42 U.S. gallons of oil. For
reasons too strange and complicated to get into, a 42-gallon barrel
of oil can yield slightly more than 44 gallons of product.
Then you can tune the refining process to get more
of some products and less of others.
That's the windup, here's the pitch:
According to the U.S. Department of Energy, refiners
on average can produce between 19 and 20 gallons of gasoline from
a barrel of oil.