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Gasoline Pricing Facts for Consumers

Get the facts on how gasoline prices are set in the marketplace.

The government does not control the maximum retail price of gasoline. Prices are determined by the market and fluctuate according to changes in supply, demand or futures markets.

The price of crude oil accounts for more than half the price of gasoline. Crude oil prices fluctuate daily with the world financial markets.

All of the petroleum products used in Minnesota must be transported from other states or countries, and in some cases we are at the "end of the pipeline." Transportation costs are included in the price we pay at the pump. We get 80% of our crude oil from Canada and the rest from other states and overseas via the Gulf of Mexico. Nationally, about 60% of our oil comes from foreign sources.

Three refineries supply the bulk of our refined products (such as gasoline), Flint Hills and St. Paul Park Refinery in the southeast metro and Murphy Oil in Superior, Wisconsin. We also get products via three petroleum pipelines.

Our refineries are running at full capacity nearly all the time.

  • Because we rely on a "full order" of gasoline from the refineries, pump prices will rise if there is any disruption in refinery operations due to fires or maintenance.
  • The costs of adding new refineries and pipelines are very high. In addition to dollar costs, there are also environmental costs to consider.

Two-thirds of the petroleum consumed in Minnesota is for transportation and that use continues to rise.

  • As consumers, we are driving more than ever before. In 1980 the average number of miles traveled per person was 5,540 and by 2010 the average was around 12,000 miles per person.
  • Fuel efficiency has increased only slightly over the past 20 years. In 1980, the average fuel economy was 22.5 miles per gallon. By 2000, the average was 24 miles per gallon.

What causes fluctuations in gasoline prices?

  • Changes to the price of crude oil directly affect the price of gasoline. In addition, speculation about political unrest in the Middle East can also indirectly impact pump prices as buyers along the supply chain adjust their buying behavior in anticipation of a change in crude oil prices.
  • Major supply disruptions in any area of the country. Because of the national market for petroleum and petroleum products, major disruptions to the supply in one region will affect the markets that set the price for crude oil and gasoline. In addition, petroleum supply disruptions can work through the system and affect all regions of the country, not just that area that is affected. This, in turn, will add to market tightness and lead to increases in regional spot markets as well.
  • Increased consumer demand. This is why gasoline prices usually go up in the summer. If the increase in demand is sudden and severe, like in a panic-buying situation, consumers themselves can cause gasoline prices to rise. This situation can cause an "artificial shortage" as consumers move gasoline from storage tanks to gas tanks. Even fear of a potential gasoline price hike (whether it occurs or not) can become a self-fulfilling prophecy.
  • Expected or unexpected outages at any refinery serving our area.
  • Activity on the commodities market can also affect gasoline prices. Beginning in the 1990s, petroleum products have been traded on the open market.

Minnesota's ethanol mandate helps reduce our reliance on imported petroleum.

  • Nearly all gasoline sold in Minnesota is blended with 10% ethanol, which allows us to offset our demand for gasoline by 10%.
  • Legislation passed in 2005 will double the amount of ethanol in gasoline in Minnesota. Under the legislation, a new E-20 mandate would take effect in 2013 unless ethanol has already replaced 20% of the state's motor vehicle fuel by 2010.
  • The use of ethanol and E85 fuel reduces harmful emissions and keeps more of our money in our state. (E85 is a blend of 85% ethanol and 15% gasoline; traditional gasoline in Minnesota contains 10% ethanol)

The Minnesota Department of Commerce, Weights and Measures Division is responsible for enforcing consumer protections in the gasoline industry.

  • Gas pumps are regularly checked for accuracy to make sure consumers are getting what they pay for.
  • Every day, field inspectors perform random testing of the quality of the gasoline sold at gas stations across the state. Tests include octane, cetane, oxygenates and sulfur content.

What consumers can do

While an individual may not be able to influence the price of gasoline at the pump, there are things you can do to reduce your gasoline consumption and costs.

  • Improve your vehicle's gas mileage.
  • Keep the tires properly inflated. Under-inflated tires force the engine to work harder.
  • Follow the speed limit. The faster you drive, the poorer your gas mileage.
  • Keep your car tuned up. Even a bad spark plug can greatly reduce mileage.
  • Keep the windows closed and use the air conditioner at highway speed to reduce drag. In stop-and-go city traffic, shut off the air conditioner and open the windows.
  • Drive at a smooth speed. Avoid sudden, fast acceleration.

Choose renewable fuel blends when available.

  • Nearly all gasoline in Minnesota contains 10% ethanol, reducing our reliance on foreign petroleum.
  • Check to see if you have a "flexible fuel" vehicle, which allows you to use less expensive E-85 fuel (85% ethanol). Many people with flexible fuel vehicles do not know they have one! Look under the fuel door lid for the word "E-85."
  • Look for biodiesel fuel for diesel vehicles. Biodiesel blends, containing up to 20% biodiesel, are becoming more available as the market for them increases. Contact the Minnesota Soybean Growers Association for a current list of stations offering
  • All #2 diesel fuel sold in Minnesota is required to contain 5% biodiesel year-round. All #1 diesel fuel sold in Minnesota is required to contain 5% biodiesel during the months of April - September. Some gas stations sell blends up to 20% biodiesel.

Choose a fuel-efficient vehicle

  • Compare the fuel economy of different vehicles before making a purchase.
  • Consider hybrid or flexible fuel vehicles which are less expensive to operate.
  • If you have two cars, use the more efficient one for short trips and city driving.

Consider alternative transportation

  • Carpool or take the bus to work.
  • Ride your bicycle to work one day a week.

For more information, visit the following web sites:

U.S. Department of Energy: for U.S. gasoline prices and fuel efficiency information on specific vehicles.

April 2011