Petrol: What Affects its Price

 

The Importance of Petrol

Petrol prices are important to any commuter. The price of petrol affects everything from your bus fare to your airfare. The production of goods and rendering of services are also affected by petrol prices, so it’s important to understand just what it is that determines the price of petrol. With petrol, the cause cannot be easily pinned down, as there are multiple factors that contribute to the price of petrol.

What affects Petrol Prices

Petrol prices are directly linked to the prices of crude oil, so understanding petrol prices means understanding what affects the price of crude oil. Like with petrol, this isn’t simply linked to one thing.

Supply and Demand

As with every commodity, the price of crude oil is largely based on supply and demand. Simply put, the more there is, the less people would be willing to pay, and the less there is, the more people would be willing to pay. Oversaturating the market with crude oil then would lead to cheap prices.

Availability of crude oil can be impacted from highly uncertain factors ranging from the weather to the political climate. In an uncertain political climate, it would be harder for companies to access the oil due to instability and higher risk, therefore the supply of crude oil would reduce and that would, in turn, increase the price.

Effects of Weather

My friend Sam from www.topbathroomrenovationsauckland.co.nz, Weather affects prices in a very similar way. Weather conditions can lead to delays and inhospitable environments can severely limit the availability of crude oil which would increase its scarcity and make it more expensive. Weather can also be linked to seasonal demands for petrol globally.

Consumption and Price

Another important factor in crude oil prices is consumption. If significantly less people used or needed crude oil basedfuel then the demand would decrease which would lead to an oversaturation of the market from the consumer end of things. An example of this would be if there was a massive shift to other forms of energy like wind or water, the demand and therefore the price of crude oil would go down. Another example is the development of technology that increased petrol consumption efficiency. This would lead to less petrol being used, which would mean less demand.

Taxes

Although the effects of taxes on crude oil are relatively minor, the taxes levied on the product does affect its end price. Of course, this varies from country to country, but countries with higher taxes will generally have higher crude oil prices, and that would also raise petrol prices. Inflation and other market variables can also affect crude oil and petrol prices.