How gas spikes 6 cents in one day

gas prices spike oil prices spikeThe oil it was made with was bought two weeks ago, but that's not the oil refiners look to when setting the price. By Steve Hargreaves, senior writer


NEW YORK (CNNMoney) -- Gas prices spiked 6 cents Friday, the biggest one-day jump in two years, and drivers are probably wondering how prices can rise so much in such a short period of time.

Sure, oil prices surged past $100 a barrel Thursday in the wake of violence and protests in the Middle East. But the gas you're pumping at the station was probably made two or three weeks ago, when U.S. crude was trading in the high $80s.

Gasoline prices and taxes by state
Prices at the pump can vary widely among states due to a number of factors. More

So why the 6 cent jump?

Current gas prices aren't pegged to how much it cost refiners to make the gallon going into your car. They're pegged to what it will cost them to replace the gallons you're consuming.

Refiners sell gasoline and other products at pipeline terminals and barge ports scattered around the country. There are about 350 terminals where gas gets picked up for distribution and this is where wholesale prices are set.

The oil used to produce a gallon of gas may have cost the refiner $85 but the price of that gallon of gas will depend on the price of oil at the time of sale.

"If a refiner sells that gallon, what will it cost him to replace it the next day," said Brian Milne, refined fuels editor at Telvent DTN, an information provider. "The market is dictating these prices, it's not a retailer or wholesaler trying to gouge."

When gas prices go up, motorists generally blame the gas station. In fact, the recent spike has been quite tough for station owners. While retail prices have risen 12 cents, wholesale prices have surged 19 cents -- jumping 13 cents on Wednesday alone.

"Gas station owners are miserable, and they still haven't passed on all the price increases," said Tom Kloza, Chief oil analyst at the Oil Price Information Service. "They would love to see prices drop."

Station owners actually make their money when prices are on the way down -- when they can buy the replacement gas for a cheaper price than they are selling the stuff that's stocked in their tanks, Kloza said.

U.S. crude out of whack

Astute market watchers may have become suspicious when gas prices spiked at the same time as U.S. oil prices. But U.S. oil prices aren't the whole story.

U.S. prices were depressed by a glut in supply and began their surge just in the past week. But worldwide oil prices had already been rising for over a month.

Gasoline consumed here is made from oil that comes from all over the world, so just watching U.S. prices doesn't yield a clear picture of why gasoline has become so expensive. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,279.74 13.75 0.08%
Nasdaq 4,579.79 -13.64 -0.30%
S&P 500 2,010.40 -0.96 -0.05%
Treasuries 2.59 -0.04 -1.60%
Data as of 7:56am ET
Company Price Change % Change
Yahoo! Inc 40.93 -1.16 -2.74%
Microsoft Corp 47.52 0.84 1.80%
Bank of America Corp... 16.95 -0.09 -0.53%
Oracle Corp 39.80 -1.75 -4.21%
Facebook Inc 77.91 0.91 1.18%
Data as of Sep 19

Sections

Law enforcement officials say Frank Tamayo was the middleman in a $5.6 million insider trading scheme that involved him eating pieces of paper to cover up the crime. More

Scotland's clear rejection of independence has eased fears that it could suffer the kind of decline seen in Quebec after it failed to break away from Canada. More

It's really good to be Larry Ellison. The Oracle founder is stepping down as CEO, so maybe he'll have more time to enjoy his glamorous life. More

As Occupy Wall Street goes on its debt-abolishing tear, thousands of people across the country are begging them to forgive their loans. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.