The single biggest factor in the pricing of fuel is the price level of the crude oil from which it is formulated.

In recent years, the world's appetite for gasoline and diesel fuel grew so quickly that suppliers of these fuels had a difficult time keeping up with demand. This demand growth is a key reason why prices of both crude oil and gasoline reached record levels in mid-2008. Then pricing can be moved right down due to the weakening economy and collapse of global petroleum demand. These factors help gasoline prices to drop Then improvement in world economies and the political events in the Middle East and North Africa , the source of about one third of world oil production, contributes to the increases in crude oil and thus gasoline prices.

There are three main grades of gasoline, based mostly on on octane levels: regular, midgrade, and premium. The octane level of a fuel refers to its opposition to combustion; a fuel with a higher octane level will be less prone to pre-ignition and detonation, which is also known as engine knocking. Premium grade is the most expensive; the price difference between the two grades is typically a small percent per gallon.


So Exactly what Are the Main Mechanisms of the Retail Price of Gasoline?
The cost to provide, transport, and sell gasoline to consumers includes:

The worth of crude oil
Refining costs and profits
Circulation and marketing costs and profits
Taxes

Retail pump pricing reflect these costs, as well as the profits (and sometimes losses) of refiners, marketers, distributors and retail station owners.

What Determines the Cost of Crude Oil?
The price level of crude oil as a share of the retail gasoline price varies over time and among locations of the Whole world. Crude oil prices are determined by both supply and demand factors. On the demand side of the equation, world economic growth is the biggest factor. One of the major factors on the supply side is the Organization of the Petroleum Exporting Countries (OPEC), which can sometimes exert massive impact on prices by setting an upper production limit on its members, which produced about 43% of the world’s crude oil in 2011. OPEC countries have ultimately all of the world’s spare oil production total capacity, and possess about two-thirds of the world’s estimated crude oil reserves. Oil prices have often spiked in response to interferences in the international and domestic supply of crude oil.

Taxes Add to the Price of Gasoline
National Federal, state, and local government taxes are the next largest part of the retail pricing of fuel. These can make dramatic variations throughout the world

Refining Outlay and Profits
Refining costs and profits vary from country to country of the Marketplace, partly due to the different gasoline formulations required in different parts of the world. The qualities of the gasoline produced depend on the type of crude oil that is used and the type of processing technology available at the refinery where it is produced. Gasoline prices are also affected by the cost of other ingredients that may be blended into it, such as ethanol.

Distribution, marketing, and retail dealer costs and profits make up the remainder of the retail price of petrol. Most gasoline is shipped from the refinery first by pipeline to terminals near consuming areas where it may be blended with other products (such as ethanol) to meet local government and market specifications, and is then delivered by tanker truck to individual gasoline stations.

Some retail outlets are owned and handled by refiners, while others are independent businesses that purchase gasoline from refiners and marketers for resale to the public. The rates on the pump includes the retailer’s cost to purchase the finished gasoline and the costs of operating the service station. It also demonstrates local market conditions and properties, such as the desirability of the location and the marketing strategy of the owner.

The financial impact of doing business by individual dealers can vary greatly depending on where the dealer is located. These costs include wages and salaries, benefits, equipment, lease/rent, insurance, overhead, and state and local fees. Even retail channels next to each other can have different traffic patterns, rents, and sources of supply that affect their prices. The amounts and location of local competitors can also affect prices.