What goes into the price of a gallon of gasoline

By the Business News Analysis desk · Published September 29, 2026

Crude oil, refining, distribution and taxes each take a share of the pump price. Here is how the pieces fit together and why pump prices can lag behind oil.

Gasoline prices are among the most visible prices in the economy. They are posted on signs at every corner, they change often, and they affect how people feel about inflation more than almost anything else. Yet the price of a gallon is made up of several distinct pieces, and only one of them is the cost of crude oil.

The four components

The US Energy Information Administration (EIA) breaks the retail price of regular gasoline into four parts and publishes their shares monthly:

• Crude oil. The cost of the oil that is refined into gasoline. This is usually the largest share, often around half of the pump price or more, and it is also the most volatile.
• Refining costs and profits. What refiners spend on turning crude into gasoline, plus their margin. This share swings with refinery capacity, outages and seasonal demand.
• Distribution and marketing. Pipelines, terminals, trucks, and the costs and margins of the retail station itself.
• Taxes. Federal, state and in some places local taxes.

The shares move over time. When crude prices spike, crude's share of the pump price rises. When a refinery outage tightens supply in one region, refining margins jump there even if crude is unchanged.

Crude oil: a global price

Oil is traded worldwide, and its price reflects global supply and demand: output decisions by major producers including OPEC+ countries, US shale production, economic growth in large consuming countries, inventories, and geopolitical risks that could disrupt supply. Two benchmarks dominate: Brent, which reflects oil from the North Sea and is the main international reference, and West Texas Intermediate (WTI), the main US benchmark. A barrel is 42 gallons, so a $10 change in the price of a barrel works out to roughly 24 cents per gallon of crude, before any refining or taxes.

Refining and the "crack spread"

Refiners buy crude and sell products such as gasoline, diesel and jet fuel. The difference between the price of crude and the prices of the products it yields is known in the industry as the crack spread, a rough measure of refining profitability. It widens when refinery capacity is tight, for example during unplanned outages, hurricanes along the Gulf Coast, or maintenance season, and narrows when product supply is plentiful.

Seasonal factors matter too. Federal and state rules require different gasoline blends in summer, designed to reduce evaporation and smog. Summer-grade gasoline is more expensive to produce, and the switchover in spring often coincides with higher prices.

Why prices differ so much by state

Drivers in some states regularly pay a dollar or more per gallon above drivers in others. Several factors add up:

• Taxes. The federal excise tax is 18.4 cents per gallon and has not changed since 1993. State taxes and fees vary widely, from well under 20 cents to more than 60 cents a gallon when all state levies are included.
• Fuel specifications. Some states, most notably California, require their own cleaner-burning blends that few refineries outside the state produce, which limits supply.
• Distance and infrastructure. Regions far from refineries or major pipelines pay more to move fuel.
• Environmental programs. Low-carbon fuel standards and cap-and-trade programs in some states add to costs.
• Local competition among retailers and the cost of land and labor for stations.

"Rockets and feathers"

Drivers often notice that pump prices seem to rise quickly when oil goes up but fall slowly when it comes down. Economists call this asymmetry "rockets and feathers", and a range of studies has found evidence of it, though its size varies. Explanations include the fact that stations buy fuel in advance and price against replacement cost, that retailers can gain margin while wholesale prices fall because shoppers search less when prices are dropping, and the time it takes for changes in crude to work through refining and distribution. In any case, pump prices generally follow wholesale gasoline prices with a lag of days to weeks.

How to read gasoline headlines

• Check which price is quoted. National averages from the EIA (published weekly) and from auto clubs differ slightly in method. Regional prices can diverge sharply from the average.
• Separate crude from refining. If crude is flat but gasoline is rising, look for refinery problems or seasonal factors.
• Remember the math. Each $1 move in a barrel of crude translates to about 2.4 cents a gallon, so a $10 swing is roughly a quarter.
• Consider the lag. A sharp fall in crude today will usually take a few weeks to show up fully at the pump.

The bottom line

The pump price is crude oil plus refining, distribution and taxes. Crude drives most of the swings, but refinery capacity, fuel rules, state taxes and local competition explain why the same week can bring very different prices in different places.