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Jul 04, 2023

10 Tips to Save on Gas This Holiday Season

The price of crude oil is the main factor in the price of gasoline. Crude prices have tumbled in recent weeks, from a high of $85.64 a barrel in October to about $81 a barrel now. Gasoline prices

The price of crude oil is the main factor in the price of gasoline. Crude prices have tumbled in recent weeks, from a high of $85.64 a barrel in October to about $81 a barrel now. Gasoline prices should follow — eventually. “I’ve noticed that when the price of a barrel of oil goes up, it seems like the price at the pump goes up immediately,” says Gross. “However, when the price of a barrel of oil drops, the price at the pump doesn’t drop immediately.”

The United States is currently the world’s largest oil producer, pumping out 18.6 million barrels a day. Saudi Arabia, the number two producer, pumps 10.8 million barrels a day, according to the EIA. Despite its prodigious oil output, however, the U.S. is also the largest oil consumer, and oil prices are set globally, not locally.

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On Nov. 23, on the eve of the holiday travel rush, President Biden authorized tapping a total of 50 million barrels of oil from the U.S. Strategic Petroleum Reserve. The White House says the U.S. move will be coordinated with India, China, Japan, South Korea and the United Kingdom. It's the first such coordinated effort. "That's actually kind of an interesting idea," Gross says. "And that may be behind one of the reasons why the price of crude has tumbled so much. So that that could actually help."

Beyond the price of crude, there are other significant factors in the price of gasoline. Distribution accounts for about 14 percent of the cost of a gallon of gas. You can track distribution costs by the gas prices across the country. “We have one state in the country where gas is still below $3 a gallon, and that’s Oklahoma,” Gross says. “They could literally run a garden hose to your car there.”

The farther you are from where the oil is produced, the higher the distribution costs. (A shortage of truck drivers is also driving up the cost of distribution.) Federal and state taxes account for 16 percent of the cost of gasoline, and refining costs and profits are responsible for 14 percent of the price of a gallon of gas.

John Waggoner covers all things financial for AARP, from budgeting and taxes to retirement planning and Social Security. Previously he was a reporter for Kiplinger's Personal Finance and USA Today and has written books on investing and the 2008 financial crisis. Waggoner's USA Today investing column ran in dozens of newspapers for 25 years.

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