What's Up with Gas Prices? They're Down!

Written by Judy Bortman

Have you recently had sticker shock (in a good way) when you pull up to the pump? Gas is under $3 per gallon nationally and under $2.60 at many northwest New Jersey stations!

What's up? Why are prices dropping? Does why matter? When it comes to gas prices, I’m probably not going out on a limb by saying that lower cost per gallon is what most motorists care about followed by how long will these prices last.

In September the national average price for gas was $3.41 per gallon; this week it's $2.91 per gallon. Gasbuddy.com found $2.756 was the average price of gas in New Jersey as of November 10, 2014.

You might say that lower gas prices are a consumer-perfect storm resulting from a convergence of favorable conditions.

The combination of factors at play are leaving Tom Kloza, chief oil analyst at the Oil Price Information Service "a little bit shocked." Global demand for gas has slowed its rise, new U.S. sources of oil are being tapped, and crude oil is flowing from the Middle East. Kloza estimates that gas prices will remain unusually low amid weak global demand.

A combination of low demand, increased gas supplies and the switch to less expensive winter-blend gasoline has played a role in the price drop, according to AAA MidAtlantic spokesperson Tracy Noble.

What makes up the cost per gallon? 

 

Have you ever wondered how the price of a gallon of gas is determined? There are four main components of the retail price; approximate percentages are:

• 13% Taxes
• 10% Distribution, Marketing, Retail Costs and Profits
• 14% Refining Costs and Profits
• 64% Crude Oil

NOTE: The cost of crude oil as part of the retail price varies over time and among regions of the country.
For example, on July 24, 2014, refiners paid an average of about $104 per barrel of crude oil, or about $2.47 per gallon; the cost has since declined.

Click the map to see gas tax rates nationwide

One of the factors contributing to lower gas prices is reduced demand. Commuters choosing transit options are helping to lower the amount of gas they use by sharing a ride, using public transit, riding a bicycle and/or walking to work, part if not all of the way.

Teleworking also contributes to reduced gas consumption. A growing number of commuters are using technology that enables them to telework on a regular basis. According to GlobalWorkplaceAnalytics.com, the growth of teleworking seen in American Community Survey data from 2012, varied widely within different sectors of the workforce.

• Federal employees = 421.0% growth (A jump in growth to 433% occurred between 2005 and 2006, the year of Hurricane Katrina; it has actually declined in subsequent years)
• State government employees = 122.1% growth
• Not-for-profit employees = 87.6% growth
• For profit employees = 70.4%
• Local government employees = 62.3%

The cost of a gallon of gas is something that we don’t personally control; it will continue to fall or rise depending on the interplay of economic factors. What we can control is how much gas we use or don’t use.

If you’d like to learn more about what drives U.S. gas prices visit EIA.gov website for the U.S. Energy Information Administration.

To find or start a carpool or vanpool, learn about public transit routes, find a local Park & Ride lot or rent a bike locker at one of the Morris County train stations, visit TransOptions.org or call us at (973) 267-7600.