Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

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

Index Last Change % Change
Dow 17,689.86 0.00 0.00%
Nasdaq 5,128.28 -0.51 -0.01%
S&P 500 2,103.84 0.00 0.00%
Treasuries 2.20 -0.06 -2.78%
Data as of 11:47pm ET
Company Price Change % Change
Bank of America Corp... 17.88 -0.25 -1.38%
Micron Technology In... 18.51 -1.39 -6.98%
Facebook Inc 94.01 -1.20 -1.26%
Apple Inc 121.30 -1.07 -0.87%
Frontier Communicati... 4.72 0.09 1.94%
Data as of 4:03pm ET
Sponsors

Sections

Some families are outraged at the sums they've been offered by Lufthansa as compensation for the Germanwings plane crash in March which killed 150 people. More

Fast-food chains that operate in more than 30 locations nationwide are the sole target of a new rule in New York to hike their minimum wage to $15. But consumers and small business owners, as well as some employees, may be the ones to pay the price. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More