Who actually sets the price of oil and gasoline in the USA?

Question

People talk about market speculators and that they are responsible for the recent rise in the cost of fuel. Others say it is the Saudi's and OPEC. If OPEC were the ones responsible, wouldn't europe's fuel costs that were $7.00/gallon a few years ago, now be $15-21/gallon?

Answer 1

Fuel prices in the free market are set by hundreds, possibly thousands of different factors.

Supply, demand, taxation, government regulation, and speculators are only the major ones.

Fuel prices in Europe have been significant higher than in the USA for decades, mainly due to sky-high taxation.

Answer 2

It is set by the local demand and supply, just like any other commodity.

Answer 3

Oil prices are set on the world spot market, but heavily influenced by the futures market.  In the futures market, investors buy pre-production oil, guessing at what it will be worth when it becomes available.  Depending on what the market does until the oil is produced, they make or lose money, because ultimately, it's what buyers are willing to pay for actual oil that matters.  Combined with this are other factors such as supply versus demand, political tensions, the value of the dollar ( major factor lately), inflation risks.

Now, gasoline is more complicated, because on top of all that, you have refining issues, demand for gasoline, distribution issues, marketing issues and so on.  A refiner may have higher demand for petroleum products other than gasoline and push off gasoline production, reducing available supply.  This creates a pocket of supply related increase, which only affects a small area.

OPEC does NOT set prices.  Read the next article about OPEC and you'll see that OPEC sets production goals among member nations in an effort to INFLUENCE prices.

Much of European fuel prices is taxation.  This is why prices haven't doubled.  The fuel part of the price has probaly doubled, but since it's only about a third, the overall price doesn't double.  Another reason is that the US and Europe are trading surplus fuel.  In the US, we produce more diesel than we can use during the summer, since there aren't enogh diesels on the road to keep up with supply.  In the winter, diesel heats homes as heating oil (same stuff different name).  Europe has far more diesels on the road (about 40% of cars), so they can't make enogh diesel.  We send them our surplus diesel and they send us their surplus gasoline.  It makes for increased costs, but all the supply is getting used up more efficiently.