Up & up: Why gas prices are rising

NEED TO KNOW
  • Average price of gas has jumped to $3.73 per gallon
  • Variety of economic factors could cause rising prices to have a bigger impact on Americans' wallets
Up & up: Why gas prices are rising

The roller coaster of gas prices in this country can cause some serious issues for Americans who depend on driving on a daily basis. And if you’re one of them, you’ve probably noticed your gas bill going up, up, up over the past month or so.

Gas prices have risen for the past 32 days straight. The average price for a gallon of regular unleaded gasoline has jumped more than 13%, hitting $3.73, according to AAA.

So what’s the deal? The price of a gallon of gas in the United States is related to the cost of crude oil and the global demand for crude oil. A number of factors contribute to the price of one gallon of gas, but about two-thirds of that cost comes directly from the price of crude oil, which has increased 10% over the past two months, according to the Energy Information Administration.

The most recent price hikes have come from a combination of factors, including rising crude oil prices, production cuts and refinery closings. OPEC – an intergovernmental agency of 12 petroleum-exporting countries – is believed to have made huge cuts in oil production over the past few months, according to CNNMoney. The decision to reduce production by as many as 1 million barrels a day was partly in response to increased production worldwide, including a rise in production in the United States.

Read more: Gas prices skyrocketing

Another factor that plays into gas prices is the type of gas. Twice a year, there’s a seasonal gasoline transition when gas providers switch their supplies from winter gasoline to summer gasoline, or vice versa. Every spring, gas suppliers transition to summer-blend fuel, which is supposed to cause less smog, according to AAA. During this process, there’s a drop in overall supply as refineries shut down temporarily to re-configure production. And unfortunately, a drop in supply often means a spike in price.

A few factors stemming from the American economy also impact gas prices. Whenever things brighten up for American consumers, increased spending is an expected byproduct for the economy – which can be good and bad. Factors such as an improving housing market and an improving jobs market lead to increased consumer spending. And when Americans are spending more, there’s a higher anticipated demand for oil. And again, when demand goes up, prices go up.

But things could really get worse for struggling Americans next month, when Congress debates what’s known as the sequester – a package of spending cuts that will take $85 billion from various federal agencies over the course of seven months. While millions of Americans are already receiving a smaller paycheck due to the payroll tax cuts that expired last month, many could face unemployment, since gig spending cuts means big job cuts.

If you want to find the cheapest gas in your area, check out Gas Buddy – a online tool and app that shows users where to find the cheapest gas nearby.

For gas prices in your area, check out AAA’s state-by-state breakdown.

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