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Volume 20
Issue 1
Spring 2015

A N EC O N O M I C E D U C AT I O N N E W S L E T T E R F R O M T H E F E D E R A L R E S E R V E B A N K O F S T. LO U I S

Behind the Signs:
Factors That Affect Gasoline Prices
© Getty Images

BY JEANNETTE BENNETT

Massive numbers of cars, pickups, SUVs, and vans are on the move! In 2012 in
the United States, approximately 233 million registered light-duty vehicles1 traveled about 2.7 trillion miles on U.S. highways.2 And each licensed driver drove an
estimated 12,579 miles annually.3 To travel these miles, consumers purchased
approximately 124 billion gallons of fuel.4

What’s Your
Question?
Gasoline Prices

Economic
Snapshot
Understanding
Gasoline Prices

Resources
New This Spring

www.stlouisfed.org/education

Drive down any U.S. highway and you will
see a seemingly endless number of gas signs.
They’re everywhere—colorful, big, bright,
carefully designed, and strategically placed
signs to grab attention. On July 7, 2008, the
retail price for regular grade gasoline in the
United States reached an all-time average-

high of $4.11 per gallon.5 But even at lower
prices, most consumers still check out gas
signs to find the best price. After all, every
dollar saved at the gas pump is a dollar that
can be spent on other things.
In recent years, the amount U.S. households have spent on gasoline has averaged
continued on Page 2

T H E F E D E R A L R E S E R V E B A N K O F S T. L O U I S : C E N T R A L T O A M E R I C A’ S E C O N O M Y ®

Behind the Signs
continued from Page 1

approximately 5 percent of total household expenditures.6 In 2011, the average U.S. household spent $2,655
on gasoline, and in 2012 that amount increased to $2,912.7
In 2013, however, the amount dropped below the 2011
level—to $2,600.8 In 2014, the average U.S. retail price of a
gallon of regular gasoline peaked in June at $3.709; for the
remainder of the year, gas signs changed mainly in one
direction—down. That downward trend has continued
into 2015, and the average U.S. household is expected to

$3,000

Forecast

$2,500
$2,000
$1,986

$1,962

$1,598

$1,000
$500
2002

2004

2006

2008

2010

2012

2014

Source: U. S. EIA (2014e): U.S. EIA, Short-Term Energy Outlook.

spend even less on gasoline in 2015 than in 2014. Gasoline
expenditures are on track to fall to their lowest level in 11
years and dip below $2,000 for the first time since 2009.10
What factors drive gasoline prices? How is the price of
gasoline determined? In other words, what’s behind the
signs? Answers to these questions can be found by examining factors that influence gas prices.

Taxes
The price of every gallon of gasoline includes taxes—
federal, state, and local taxes.11 The federal excise tax on
gasoline has remained at 18.4 cents per gallon since 1993,
with about 60 percent of the amount set aside for highway and bridge construction.12 State gasoline taxes vary,
however, and the average state tax on gasoline is 24.17
cents per gallon. Some states and localities add additional
taxes to the price of gasoline, including local and state
sales taxes and a variety of other taxes.13

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Arkansas
California
Georgia
Kentucky
Mississippi

Tax

State

21.80
41.06
8.00
32.30
18.40

Missouri
Pennsylvania
Tennessee
Texas

cents per gal.

Tax

cents per gal.

17.30
41.80
21.40
20.00

Seasonal and Weather Effects

Nominal dollars

$0
2000

State

Note: *Taxes as of January 1, 2014, exclusive of county and local taxes.
Source: U.S. EIA (2014a).

Average Annual Household Expenditures on
Gasoline and Motor Oil (2000-2015)

$1,500

S E L E C T E D S TAT E G A S O L I N E TA X E S

In the United States, seasons of the year affect gasoline prices. Generally, prices begin an upward trend in the
spring. U.S. refineries often conduct maintenance at this
time of year, which can lead to a drop in gasoline production and thus a decrease in supply.14 Also, in warmer
temperatures, government regulations require different
gasoline formulas, which are better for the environment.
The additives required for the summer formula increase the
production costs for refineries and thus the prices paid
at the pump. Warmer temperatures also bring increased
travel, which increases the demand for gasoline, and this
translates into higher prices at the pump. Colder temperatures, on the other hand, can lead to savings at the pump:
People tend to travel less (reducing demand), and the winter formula used in some areas is less costly to produce.15
Unplanned events such as severe weather and other
natural disasters can affect gasoline prices. Even the
anticipation of a potentially destructive event can trigger
increased demand and, in turn, increase prices. If events
shut down refineries or disrupt the supply of gasoline, the
reduced supply will tend to cause prices to rise. As the following report shows, Hurricane Katrina, which struck the
Gulf Coast in 2005, is one (of many) hurricanes that caused
a severe reduction in supply:
According to the Minerals Management Services
(MMS), as of 11:30 Central Time August 31, 2005, Gulf
of Mexico oil production was reduced by over 1.371
mb/d [millions of barrels per day] as a result of Hurricane Katrina, equivalent to about 91.45 percent of daily
Gulf of Mexico oil production (which is 1.5 mb/d).16

Location
As mentioned earlier, taxes added at the local level cause
Regular Grade Gasoline Prices at Retail Outlets by Region
gasoline prices to vary. Other location-specific factors can make
January 26, 2015
Rocky Mountain
prices differ as well. For example, ordinary business expenses, such
Midwest
$1.87 per gallon
$1.94 per gallon
17
as wages, rent, insurance, and utilities, can vary widely. Also, the
New
England
number of competitors plays a role in gas pricing. For example,
$2.17
per gallon
gas stations physically close together must aggressively compete
Central
on price to gain customers, whereas gas stations farther apart
Atlantic
$2.19
per gallon
have more flexibility in pricing. Generally, fewer gas stations mean
higher prices. And traffic patterns can affect gasoline prices as well.
Stations located in highly traveled areas with easy access naturally
West Coast
Lower
have more customers.
$2.33 per gallon
Atlantic
$2.02
Two additional factors that may affect gasoline prices include
per gallon
population density and the availability of public transportation.
Gulf Coast
Population density determines the number of potential gasoline
$1.85 per gallon
customers—that is, the potential demand for gasoline. Public
transportation also can affect the demand for gasoline: The more
Note: Includes taxes.
people choose public transportation over driving, the fewer gallons
Source: U.S. EIA (2015e): U.S. EIA, 878 Motor Gasoline Price Survey..
of gasoline are sold.18
The process of creating gasoline from beginning to end—from
oil well to gas station—requires transportation, which affects pricing. Most gasoline is shipped from refineries (where crude oil is
refined into gas) by pipeline to storage facilities near sales regions.
From there, trucks deliver the gasoline to stations. Usually, gasoline prices tend to be higher the farther the gasoline must travel
to get to the pump. Once again, location can affect prices at the
pump. Ownership of the refineries and stations can affect transportation prices as well. If the final point of sale (a gas station) is
owned and operated by the refiner, the transportation costs, and
ultimately the cost of the gasoline, will tend to be lower.19

Crude Oil: The Primary Driver of Gasoline Prices
According to the U.S. Energy Information Administration
(EIA), changes in the price of crude oil have been the primary
reason for changes in U.S. gasoline prices in recent years.20 The EIA
estimates that as much as two-thirds of the price of gasoline is due
to crude oil and refinery costs.21 Crude oil is sold by the barrel. If
nothing else changes, a $1 change in the price of a barrel of crude
oil will result in approximately a 2.4-cent change in the price of a
gallon of gasoline.22
Because the price of crude oil is the primary driver of gasoline
prices, trends in crude oil prices are related to trends in gasoline
prices. To understand crude oil pricing, some basic information is
continued on Page 4

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Behind the Signs
continued from Page 3

What Do We Pay For in a Gallon of Regular Grade Gasoline?
2000 to 2013
Average Retail
Price: $2.45

2013
Average Retail
Price: $3.51

11%

Distribution &
marketing

13%

Refining costs &
profits

19%

Federal & state
taxes

56%

Crude oil

9%
11%
12%

68%

December 2014
Average Retail
Price: $2.54
Distribution &
marketing
Refining costs &
profits

26%
1%

Federal & state
taxes

17%

Crude oil

57%

Note: Totals may not equal sum of components due to independent rounding.
Source: U.S. EIA (2014b,i) averages based on Gasoline and Diesel Fuel update.

helpful. The prices of two particular crude oils, West Texas
Intermediate (WTI) and Brent, serve as benchmarks for the
pricing of other crude oils. That is, buyers and sellers look
at the prices of these two crude oils to determine prices of
other crude oil. WTI and Brent are basically the same product with only slight differences. WTI, often called Texas
sweet light crude, is both extracted and refined in the
United States. Its price serves as a benchmark for prices of
some crude oil in the United States. Cushing, Oklahoma,
a major trading hub for U.S. crude oils, is the headquarters for setting the price of WTI. Brent is sourced from
European oil fields in the North Sea and refined in Europe.
In recent years, Brent crude oil has become the primary
international benchmark for pricing crude oil.23
Overall, the prices of WTI and Brent tend to move in the
same direction and gasoline prices tend to follow the ups
and downs in the prices of these crudes.

Supply and Demand
The price of crude oil is determined by global supply
and demand. As global demand increases or supply
decreases, the price of crude oil increases. Conversely,
as global demand decreases or supply increases, the
price decreases.
Global Demand
Global crude oil demand is the total crude oil demanded
from all countries in the world. Some countries demand
far more than others, and the demand from each country
can fluctuate. Some countries, however, are currently on
upward or downward trends.
The demand for crude oil in the United States is affected
to a large degree by driving since approximately 45 percent
of the total amount of crude oil consumed in the United
States is for gasoline to fuel private passenger vehicles.24
And despite an increase in population, there has been a
decrease in the demand for fuel used for consumer driving
in recent years. A 2014 study by the University of Michigan
Transportation Research Institute attributes this decreased
demand to several factors, including increased vehicle
fuel economy, increased telecommuting, increased use of
public transportation, and a trend toward urbanization.25 In
addition, the study revealed the following U.S. trends:

Source: U.S. EIA (2015j, k, l).

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• Gasoline consumption decreased 11 percent from a
high of almost 139 billion gallons in 2004 to almost
124 billion gallons in 2012.
• The number of registered light-duty vehicles declined
from 236.4 million in 2008 to 233.8 million in 2012.
• Miles driven decreased from a high of 2.77 trillion
miles in 2006 to 2.66 trillion miles in 2012.
This decrease in the demand for crude oil has also
occurred in Europe. For Russia specifically, a downturn in
the economy is expected to result in a decrease in their
demand for crude oil in both 2015 and 2016.26 But some
countries in Asia, Latin America, and the Middle East,
for example, are increasing their fuel consumption.27 In
China, the world’s second-largest oil consumer (behind the
United States), demand for crude oil is expected to continue an upward trend. One driving force behind this trend
is sales of private passenger vehicles, which have increased
29 percent over the past 13 years.28
In 2014, the cumulative global demand for crude oil was
approximately 91.4 million barrels per day. According to
the EIA, global demand is expected to increase by 1 million barrels per day in both 2015 and 2016.29 Although U.S.
demand for crude oil has decreased, global demand
is expected to reach 93.4 million barrels per day by the
end of 2016.
Global Supply
As global demand for crude oil has increased, the EIA
estimates that global inventories have increased as well, by
almost 0.8 million barrels per day in 2014. This stockpiling
is expected to continue throughout the first half of 2015.30
The supply of crude oil available worldwide is largely
controlled by the Organization of the Petroleum Exporting
Countries (OPEC). OPEC is a group of 12 countries that
attempts to actively manage how much oil is produced by
setting production targets for its members. (The technical
term for this type of organization is cartel.) OPEC countries
produce approximately 40 percent of the world’s crude oil
and about 60 percent of total crude oil traded internationally. Because this share controlled by OPEC is so large and
widespread, its actions greatly affect global supply and,
ultimately, gas prices.31
The global supply of crude is also affected by U.S. crude

production. In 2015, U.S. production is expected to average
9.3 million barrels per day, which is an increase of 700,000
barrels per day above the 2014 level.32 Every barrel of crude
oil produced in the United States contributes to the total
global supply.
In addition, oil reserves are an important consideration.
Oil reserves, or proved reserves, are amounts of crude oil
in a given area known to be recoverable with reasonably
certainty in the future—but not pumped yet. U.S. crude
oil reserves rose for the fifth consecutive year in 2013,
increasing by 9 percent over the 2012 level to 36.5 billion
barrels. The increase in U.S. reserves serves as an indicator of potential future crude production. Specifically, Texas
remains the leading state in total oil reserves, increasing
from 11.1 billion barrels in 2012 to 12 billion barrels in 2013.
However, among individual states, in 2013, North Dakota
had the largest increase in oil reserves: 51 percent, for a
total of 1.9 billion barrels.33
Oil prices in the United States respond to both the
international and domestic supplies of crude oil. In recent
times, the surge in North American crude oil output
combined with the production in OPEC countries has
created a global supply that exceeds global demand.34
In turn, crude oil prices—and thus gasoline prices—have
spiraled downward.

Conclusion
According to the Federal Highway Administration, there
are over 164,000 miles of highways in the United States.35
Along these miles and miles of highways are gas signs that
prominently display current prices. Behind the signs are
numerous factors that determine gasoline prices: taxes,
location, seasonal and weather effects, but especially the
price of crude oil. The global supply and demand for crude
oil dictate its price in the global marketplace and ultimately
the price at the pump.
Crude oil prices are historically volatile, and statistics
for the supply and demand of crude oil are a snapshot of
a moment in time. The industry continues to change and,
with all factors considered, what’s happening today can—
and will—change tomorrow. We can expect gasoline
prices to change in response. Of course, so will the
numbers on the signs.
continued on Page 6
5

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Behind the Signs
continued from Page 5

REFERENCES
U.S. EIA. “Gasoline and Diesel Fuel Update.” Petroleum & Other Liquids,
January 26, 2015e; http://www.eia.gov/petroleum/gasdiesel/gas_geographies.
cfm#pricesbyregion.

American Energy Independence. “American Fuels.” N.d; http://www.american
energyindependence.com/fuels.aspx.
Owyang, Michael and Vermann, E. Katarina. “Rockets and Feathers: Why Don’t
Gasoline Prices Always Move in Sync with Oil Prices?” Federal Reserve Bank
of St. Louis Regional Economist, October 2014; https://www.stlouisfed.org/
publications/regional-economist/october-2014/rockets-and-feathers-why-dontgasoline-prices-always-move-in-sync-with-oil-prices.

U.S EIA. “Frequently Asked Questions.” January 2015f; http://www.eia.gov/tools/
faqs/faq.cfm?id=247&t=10.
U.S. EIA. “Supply: OPEC.” Energy & Financial Markets: What Drives Crude Oil Prices?
January 2015g; http://www.eia.gov/finance/markets/supply-opec.cfm/.

Sivak, Michael. “Has Motorization in the US Peaked? Part 5: Update Through
2012.” Report No. UMTRI-2014-11, The University of Michigan Transportation Research Institute, April 2014; http://deepblue.lib.umich.edu/bitstream/
handle/2027.42/106404/102994.pdf.

U.S. EIA. “Data.” Petroleum & Other Liquids, February 2, 2015h, release; http://
www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=emm_epmr_pte_nus_
dpg&f=w.
U.S. EIA. “Gasoline and Diesel Fuel Update.” Petroleum & Other Liquids, February
2, 2015i, release; http://www.eia.gov/petroleum/gasdiesel/.

Strauss, Gary. “2015 Gas Prices Could Avg. $2.64, Lowest Since 2009.” USA Today,
January 6, 2015;
http://www.usatoday.com/story/money/business/2015/01/05/gasbuddy
com-2015-gas-prices-will-average-just-264-a-gallon/21292327/.

U.S. EIA. Crude Oil Prices: Brent - Europe [MCOILBRENTEU]. Retrieved from
FRED®, Federal Reserve Bank of St. Louis, February 19, 2015j; https://research.
stlouisfed.org/fred2/series/MCOILBRENTEU/.

U.S. Department of Transportation, Federal Highway Administration. “Our
Nation’s Highways: 2011.” Publication FHWA-PL-10-023, May 2010; http://www.
fhwa.dot.gov/policyinformation/pubs/hf/pl11028/chapter1.cfm.

U.S. EIA. Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma
[MCOILWTICO]. Retrieved from FRED®, Federal Reserve Bank of St. Louis,
February 19, 2015k; https://research.stlouisfed.org/fred2/series/MCOILWTICO/.

U.S. EIA. “Special Report: Hurricane Katrina’s Impact on the U.S. Oil and Natural
Gas Markets.” August 31, 2005; http://www.eia.gov/oog/special/eia1_
katrina_083105.html.

U.S. EIA. US Regular Conventional Gas Price [GASREGCOVM]. Retrieved from
FRED®, Federal Reserve Bank of St. Louis, February 19, 2015l; https://research.
stlouisfed.org/fred2/series/GASREGCOVM/.

U.S. EIA. “U.S. Household Expenditures for Gasoline Account for Nearly 4% of
Pretax Income.” Today in Energy, February 4, 2013; http://www.eia.gov/today
inenergy/detail.cfm?id=9831.

U.S. Federal Highway Administration. Vehicle Miles Traveled [TRFVOLUSM227NFWA]. Retrieved from FRED®, Federal Reserve Bank of St. Louis, February 2,
2015; https://research.stlouisfed.org/fred2/series/TRFVOLUSM227NFWA/.

U.S. EIA. “Table EN1: Federal and State Motor Fuels Taxes.” Petroleum Marketing Monthly, May 2014a, p. 104; http://www.eia.gov/petroleum/marketing/
monthly/pdf/mgt.pdf.

Wikipedia. “Fuel Taxes in the United States.” N.d.; http://en.wikipedia.org/wiki/
Fuel_taxes_in_the_United_States.

U.S. EIA. “Gasoline Explained: Factors Affecting Gasoline Prices.” July 18, 2014b,
version; http://www.eia.gov/energyexplained/index.cfm?page=gasoline_
factors_affecting_prices.
U.S. EIA. “What Drives U.S. Gasoline Prices?” October 2014c;
http://www.eia.gov/analysis/studies/gasoline/pdf/gasolinepricestudy.pdf.
U.S. EIA. “U.S. Oil Reserves Continue Rising, Surpass 36 Billion Barrels for First
Time Since 1975.” Today in Energy, December 5, 2014d; http://www.eia.gov/
todayinenergy/detail.cfm?id=19071.
U.S. EIA. “U.S. Household Gasoline Expenditures in 2015 on Track To Be the
Lowest in 11 Years.” Today in Energy, December 16, 2014e; http://www.eia.gov/
todayinenergy/detail.cfm?id=19211.
U.S. EIA. “Global Petroleum and Other Liquids.” Short-Term Energy Outlook, January 13,
2015a, release; http://www.eia.gov/forecasts/steo/report/global_oil.cfm.
U.S. EIA. “Market Expectations of Oil Price Uncertainty Have Increased in Recent
Months.” Today in Energy, January 14, 2015b; http://www.eia.gov/todayinenergy/
detail.cfm?id=19571.
U.S. EIA. “Regional Refinery Trends Evolve to Accommodate Increased Domestic
Crude Oil Production.” Today in Energy, January 15, 2015c; http://www.eia.gov/
todayinenergy/detail.cfm?id=19591.
U.S. EIA. “Regional Differences in China’s Vehicle Adoption Reflect Differences in
Income.” Today in Energy, January 16, 2015d; http://www.eia.gov/todayinenergy/
detail.cfm?id=19611.

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Glossary

ENDOTES
1

Cars, pickup trucks, SUVs, and vans only; does not include commercial tractor
trailers.

Sivak (2014, p. 3).

Sivak (2014, p. 8).

Sivak (2014, p. 3).

U.S. EIA (2015f ).

U.S. EIA (2014e).

U.S. EIA (2013).

U.S. EIA (2014c, p. 1).

U.S. EIA (2015h).

U.S. EIA (2014e).

Gasoline taxes differ from diesel taxes. The information provided is for gasoline
only.

Wikipedia (n.d.).

U.S. EIA (2014a, p. 104).

U.S. EIA (2014b).

Owyang and Vermann (2014, p. 7).

U.S. EIA (2005).

U.S. EIA (2014b).

Owyang and Vermann (2014, p. 8).

U.S. EIA (2014b).

U.S. EIA ( 2014b).

The percentage may vary according to crude prices and other factors of production.

1/42 of $1 because there are 42 gallons in one barrel. U.S. EIA (2014c, p. 5).

Owyang and Vermann (2014, p. 8).

American Energy Independence (n.d.).

Sivak (2014, pp. i and 1).

U.S. EIA (2015b).

U.S. EIA (2014c, p. 3).

U.S. EIA (2015d).

U.S. EIA (2015b).

U.S. EIA (2015a).

U.S. EIA (2015g).

U.S. EIA (2015c).

U.S. EIA (2014d).

Strauss (2015).

U.S. Department of Transportation, Federal Highway Administration (2010).

Consumers – People who buy goods and services to
satisfy their wants.
Demand – The quantity of a good or service that buyers
are willing and able to buy at all possible prices during
a certain time period.
Excise tax – A tax on use or consumption of certain
products such as vehicle fuels, cigarettes, tires, and
alcohol. An excise tax may be levied by the federal or
state government and is often included in the price of
a product.
Inelastic demand – The type of demand that exists when
the percentage change in quantity demanded is less
than the percentage change in price; that is, consumers are not very sensitive to a change in the price of a
good or service.
Nominal price – The actual price at the time not
adjusted for inflation.
Population density – The number of people living in a
given measure of land (e.g., a square mile).
Price – The amount consumers pay to purchase a good
or service.
Production costs – The total costs incurred to produce
a good. The amount spent on resources (inputs) used
to produce a good or service. Inputs include wages
and salaries, payments for purchase or rent of building
space and equipment, utilities, and raw materials.
Supply – The quantity of a good or service that producers are willing and able to sell at all possible prices
during a certain time period.
Taxes – Fees charged by the government on business or
individual income, activities, property, or products that
people are required to pay.
U.S. Energy Information Administration (EIA) – The
primary federal government authority on energy statistics and analysis. The agency is part of the U.S. Department of Energy.

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WHAT ’S YOUR QUESTION?

Gasoline Prices
1. Gasoline signs usually have different prices for different grades of gasoline. How do the grades differ?
The three main grades of gasoline—regular, midgrade,
and premium—are based on octane levels. Gas companies may use various names such as unleaded, super, or
premium for the different grades. Higher octane helps
engines resist knocking, which occurs (and is heard)
when an engine isn’t processing gasoline smoothly. By
law, bright yellow stickers on gas pumps identify octane
levels, and higher octane levels have higher prices. Each
vehicle has a recommended octane level (noted in the
vehicle’s user manual). Most light-weight vehicles need
only the lowest octane level and do not perform any better with higher grades. Sports cars and luxury vehicles are
more likely to require higher octane grades.
Source: http://www.consumer.ftc.gov/articles/0210-paying-premium-high-octanegasoline; http://www.eia.gov/EnergyExplained/?page=gasoline_home.

2. Why do gasoline prices end with 9/10?
The fraction 9/10 stands for nine-tenths of 1 cent. So, for
example, $3.49 9/10 is actually $3.499. Years ago, when
prices were relatively lower, 1 cent could be a significant
price increase. During the Great Depression, gasoline
prices fell below 10 cents a gallon at times and fractional
pricing allowed smaller incremental price changes. By the
mid-1930s the practice was common. The pricing to 0.9
cents remained because marketing experts learned that
consumer perception was important—a price of $1.999
sounds less expensive than $2.00.
Source: http://www.nacsonline.com/YourBusiness/FuelsReports/GasPrices_2013/
Pages/Why-Is-Gas-Priced-Using-Fractions.aspx.

3. When was the Organization of the Petroleum Exporting Countries (OPEC) formed, which countries are
members, and what is its purpose?
OPEC was organized in 1960 and the 12 member countries
are Iran, Iraq, Kuwait, Saudi Arabia, Qatar, United Arab
Emirates, Algeria, Angola, Ecuador, Libya, Nigeria, and Venezuela. Although the individual member countries make
production decisions, OPEC negotiates with oil companies
to manage oil production and prices by setting production
targets for each country.
Source: http://www.eia.gov/energyexplained/index.cfm?page=oil_imports;
http://www.eia.gov/energy_in_brief/article/world_oil_market.cfm.

4.When offshore oil and gas production occurs, how
far from the coast do oil companies have the right to
drill? What are the boundaries?
For most coastal states, drilling rights extend about 3.5
miles from shore. However, for the Texas and Florida
coasts along the Gulf of Mexico, the boundaries extend
farther—to about 10.35 miles from shore.
Source: http://www.eia.gov/tools/faqs/faq.cfm?id=42&t=6.

5. Gasoline signs often include the price of diesel fuel,
which usually costs more than gasoline. Why is diesel
fuel more expensive? Has it always been that way?
Before September 2004, diesel fuel cost less than
gasoline. Since that time, however, diesel fuel prices have
remained higher for a number of reasons:
• The federal excise tax on diesel fuel is 24.4 cents per
gallon, 6 cents higher than on gasoline.
• A change in diesel fuel’s formula to reduce pollution
increased production and distribution costs for diesel.
• Global demand for diesel fuel has increased.
Source: http://www.eia.gov/tools/faqs/faq.cfm?id=9&t=9.

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WHAT ’S YOUR QUESTION?

Gasoline Prices
6. How many gallons of gasoline and diesel fuel come
from one barrel of crude oil?

•

In 2013 in U.S. refineries, one barrel of crude (42 gallons)
produced on average about 12 gallons of diesel fuel and
19 gallons of gasoline.
Source: http://www.eia.gov/tools/faqs/faq.cfm?id=327&t=9.

Corporate NOCs do not operate as an extension
of the government. Although they may support
their government’s goals, they are profit oriented and thus primarily commercially driven.
Such oil companies include Petrobras (Brazil)
and Statoil (Norway).

Source: http://www.eia.gov/energy_in_brief/article/world_oil_market.cfm.

7. What are proved oil reserves and the total quantity
of such reserves?
Proved oil reserves are the amount of oil in a given area
known to be recoverable with reasonable certainty, with
about 1.6 trillion barrels worldwide.
Source: http://www.eia.gov/energy_in_brief/article/world_oil_market.cfm.

8. In the world market for crude oil, are all oil companies owned and operated similarly?
No. There are three types of oil companies, with different
mixes of operation and ownership:
•

International oil companies (IOCs) are entirely
investor owned and accountable to their
shareholders. Decisions are made in the interest
of the company and its shareholders—not the
government. Large U.S.-based IOCs include
ExxonMobil, Chevron, BP, Royal Dutch Shell,
and ConocoPhillips.

•

National oil companies (NOCs) are governmentowned companies that operate as an extension
of the government. They support their governments financially and strategically and control
most of the world’s proved oil reserves (78 percent in 2012) and oil production (58 percent in
2012). Leading NOCs by share of world production include Saudi Aramco, the National Iranian
Oil Company, and the China National Petroleum
Corporation. Each OPEC member country has
at least one NOC, although some, such as Iraq,
have several. The United States does not have
any NOCs.

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ECONOMIC SNAPSHOT

Understanding Gasoline Prices
1.

Average sales-weighted fuel economy is calculated
based on the monthly sales of new cars, SUVs, vans,
and pickup trucks and the miles per gallon (MPG)
ratings listed on window stickers of these new vehicles. Monthly averages by model year (MY) show an
increase in the average MPG rating of new vehicles
purchased from October 2007 to January 2015.

Gasoline Prices Tend to Have Little Effect on Demand for Car Travel
Regular gasoline retail price

U.S. vehicle miles traveled

Dollars per gallon (nominal)
4.50

25.4

Thousand VMT per capita
14

4.00

3,000
2,500

2.50

2,000

2.00

1,500

1.50

1,000

500

0.00
1991

0
1991

1998

Oct-14
Jan-15

Apr-14

Oct-13

Apr-13

Oct-12

Apr-12

Month–Year

Source:
http://www.umich.edu/~umtriswt/EDI_sales-weighted-mpg.html.
Source:
http://www.umich.edu/~umtriswt/EDI_sales-

Michael Sivak and Brandon Schoettle
University of Michigan Transportation Research Institute

weighted-mpg.html.

Bakken

Marcellus

Utica
Niobrara

Haynesville

Eagle Ford
Source: http://www.eia.gov/petroleum/drilling/#tabs-summary-2.

Region

2012

1998

2005

Thousand barrels/day*

Top World Oil Producers, 2013
(Thousand barrels/day)

Country

Production

United States

12,343

Saudi Arabia

11,702

Russia

10,764

China

4,459

Canada

4,074

United Arab Emirates

3,441

Iran

3,192

Iraq

3,058

Mexico

2,908

Kuwait

2,812

Brazil

2,694

Venezuela

2,689

Nigeria

2,372

Bakken

1,303

Eagle Ford

1,716

Haynesville

Marcellus

Qatar

2,067

Niobrara

395

Angola

1,889

Permian

1,932

Utica

Source: http://www.eia.gov/countries/index.cfm?topL=con.

Note: *February 2015 oil production.
Source: http://www.eia.gov/petroleum/drilling/#tabs-summary-2.
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2012

4. The United States, Saudi Arabia, and Russia are the top
three oil-producing countries. Together they produce
almost as much oil as the next 12 countries combined.

2. Seven regions in the Lower 48 states produce most of
the U.S. oil, with 95 percent of domestic oil production
growth coming from these regions.

Permian

2005

Note: VMT is vehicle miles traveled. Per capita figures reflect U.S. population age 16 and over.
Vehicle miles traveled figures are 12-month rolling averages.
Source: U.S. EIA, based on Federal Reserve Bank of St. Louis [data]. http://www.eia.gov/today
inenergy/detail.cfm?id=19191.

Oct-11

Apr-11

Oct-10

Apr-10

Oct-09

Apr-09

Oct-08

Apr-08

MY2008
20.8

MY2012
23.5

MY2011
22.5

MY2010
22.1

MY2009
21.3

MY2013
24.6

0.50

1.00

MY2014
25.3

Billion miles traveled
3,500

3.50
3.00

Oct-07

Average Sales-Weighted MPG

Fuel Economy of New Cars
26.0
25.5
25.0
24.5
24.0
23.5
23.0
22.5
22.0
21.5
21.0
20.5
20.0
19.5

The demand for gasoline is relatively inelastic; consumption varies little even when gasoline prices
change. This means that, in the short run, nominal
prices (actual prices paid at the time of purchase) tend
to have little effect on the miles traveled.

ECONOMIC SNAPSHOT

Understanding Gasoline Prices
5.

Current Economic Data

The United States is the world’s largest consumer of
oil, using almost twice as much as China, the world’s
second-largest consumer.
Top World Oil Consumers, 2013
(Thousand barrels/day)

Country

Consumption

Q1-’14

Q2-’14

Q3-’14

Q4-’14

Growth rate
Real GDP

2.0%

1.3%

3.1%

0.4%*

Inflation rate
Consumer Price Index

2.3%

1.0%

2.1%

2.2%

Civilian unemployment rate

8.3%

8.2%

8.0%

7.8%

United States

18,961

China

10,303

Japan

4,531

Russia

3,515

India

3,509

Brazil

2,998

Saudi Arabia

2,968

Canada

2,431

Germany

2,403

1,600

South Korea

2,324

1,400

Mexico

2,044

Iran

1,870

France

1,767

600

Indonesia

1,635

400

United Kingdom

*Third estimate.
Source: GDP, Bureau of Economic Analysis; www.bea.gov;
Unemployment and consumer price index, Bureau of Labor Statistics; www.bls.gov.

The United States was the top contributor to global oil
supply growth in 2014, while Iraq was next.
Top Five Contributors to Global Oil Supply Growth in 2014
Thousand barrels/day
1,800

1,590

1,200
1,000
800
330

200

1,508

United States

Source: http://www.eia.gov/countries/index.cfm?topL=con.

Iraq

260

250

180

Canada

Brazil

Iran

Source:
EIA,
Short-Term
Energy Short-Term
Outlook.Energy
http://www.eia.gov/todayinenergy/detail.cfm?id=19911.
Source: USU.S.
Energy
Information
Administration,
Outlook

6. Texas and North Dakota produce almost half of the crude
oil in the United States.

Monthly Crude Oil Production by State (April 2010–April 2014)
Million barrels/day
9
8

North Dakota

48%
of total

6
5
4

Texas

26%

All other states

2
1
0
Apr-10

Oct-10

Apr-11

Oct-11

Apr-12

Oct-12

Apr-13

Oct-13

Apr-14

Source: U.S. EIA, Petroleum Supply Monthly; http://www.eia,gov/todayinenergy/detail.cfm?id=16931.

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BULLETIN BOARD

Rock and “Rolling” with Economics

LITTLE ROCK

Interactive Whiteboards +
Children’s Books = A Great Combination
July 8, 2015 | 8:30 a.m. – 3:30 p.m.
Little Rock Branch
Registration:
https://www.stlouisfed.org/events/2015/07/lrk-eeinteractivewhiteboards

LOUISVILLE

June 4, 2015 | 8:30 a.m. - 3:30 p.m.
Itawamba Community College, Belden, MS
Registration: 662-407-1500 or rakelly@iccms.edu

Focus on the Economy: Outside the Box
June 15-16, 2015 | 8:00 a.m. – 5:00 p.m.
MS Braves Stadium, Pearl, MS
Registration: mscee.org/workshop-signup/

Interactive Whiteboards +
Children’s Books = A Great Combination

KCEE Financial Summit with
Murray State
June 22, 2015 | 9:00 a.m. – 4:00 p.m. (EDT)
Murray State University—
Paducah Regional Campus, Paducah, KY
Registration: email Erin.A.Yetter@stls.frb.org

July 8, 2015 | 8:30 a.m. – 3:30 p.m.
Memphis Branch
Registration:
https://www.stlouisfed.org/events/2015/07/memeeinteractivewhiteboards

KCEE Financial Summit with
astern Kentucky University

Personal Finance Training
for Secondary Teachers

June 26, 2015 | 9:00 a.m. – 4:00 p.m. (EDT)
Eastern Kentucky University—Corbin Campus,
Corbin, KY
Registration: email Erin.A.Yetter@stls.frb.org

July 9-10, 2015 | 8:30 a.m. – 3:30 p.m.
Federal Reserve Bank of Atlanta—
Nashville Branch
Registration:
email jeannette.n.bennett@stls.frb.org

Interactive Whiteboards +
Children’s Books = A Great Combination
(K-2) July 8, 2015 | 9:00 a.m. – 3:30 p.m. (EDT)
(3-5) July 9, 2015 | 9:00 a.m. – 3:30 p.m. (EDT)
Louisville Branch
Registration:
https://www.stlouisfed.org/events/2015/07/lvl-eeinteractivewhiteboards

MEMPHIS

Personal Finance Training
for Secondary Teachers
March 19-20, 2015 | 8:30 a.m. – 3:30 p.m.
Teaching and Learning Academy, Memphis, TN
Registration:
email jeannette.n.bennett@stls.frb.org.

Note: All times are central daylight time unless otherwise indicated.

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July 16-17, 2015 | 9:00 a.m. – 4:00 p.m.
Agricenter International, Memphis, TN
Registration: http://agweb.ag.utk.edu/extension/
FCS/hsfpp/index.asp
July 21-22, 2015 | 9:00 a.m. – 4:00 p.m.
West Tennessee Research and AG Center
Jackson, TN
Registration: http://agweb.ag.utk.edu/extension/
FCS/hsfpp/index.asp
August 20-21, 2015 | 8:30 a.m. – 3:30 p.m.
Middle Tennessee State University
Murfreesboro, TN
Registration:
email jeannette.n.bennett@stls.frb.org

BULLETIN BOARD

Bank Contacts

S T. L O U I S

Little Rock
Kris Bertelsen
501-324-8368
kris.a.bertelsen@stls.frb.org

Get Money Smart!
April 23, 2015 | 3:30 p.m. – 7:30 p.m.
Federal Reserve Bank of St. Louis
Registration: https://www.stlouisfed.org/
events/2015/04/ee-getmoneysmart

Louisville
Erin Yetter
502-568-9257
erin.a.yetter@stls.frb.org

AP Economics Conference
June 16, 2015 | 4:00 p.m. – 8:00 p.m.
Pre-conference workshop and dinner
June 17, 2015 | 7:30 a.m. – 6:00 p.m.
June 18, 2015 | 7:30 a.m. – 3:15 p.m.
June 19, 2015 | 7:30 a.m. – 3:00 p.m.
Federal Reserve Bank of St. Louis
Registration:
https://www.stlouisfed.org/events/2015/06/
eeapecon

Memphis
Jeannette Bennett
901-531-5108
jeannette.n.bennett@stls.frb.org
St. Louis
Mary Suiter
314-444-4662
mary.c.suiter@stls.frb.org
Mark Bayles
314-444-7488
mark.a.bayles@stls.frb.org

Global Economic Forum
Teacher Workshop

Barb Flowers
314-444-8421
barbara.flowers@stls.frb.org

June 29, 2015 | 8:00 a.m. – 4:00 p.m.
June 30, 2015 | 8:00 a.m. – 3:30 p.m.
Federal Reserve Bank of St. Louis
Registration:
https://www.stlouisfed.org/events/2015/06/
eeglobaleconforum

Eva Johnston
314-444-8567
eva.k.johnston@stls.frb.org
Scott Wolla
314-444-8624
scott.a.wolla@stls.frb.org

Interactive Whiteboards +
Children’s Books = A Great Combination
July 8-9, 2015 | 8:30 a.m. – 2:30 p.m.
Federal Reserve Bank of St. Louis
Registration: https://www.stlouisfed.org/
events/2015/07/eeinteractivewhiteboards

WWW.STLOUISFED.ORG/EDUCATION

FEATURED RESOURCES

New this Spring!
ENGAGING LESSONS BASED ON BOOKS

NEW RESOURCES

Alexander, Who Used To Be Rich Last Sunday
(Grades K-2)
In the story, Alexander
receives a dollar from his
grandparents that he plans
to save, but he spends it
all, a little at a time. In this
lesson, students count by
2’s to fill a container with
100 pennies. They are
asked whether 100 pennies is the same amount of money
as one dollar. They listen to the story, and as Alexander
spends his money, students come up and remove the
correct number of pennies from a container. At the end
of the story, students are again asked if 100 pennies is the
same amount of money as one dollar. Students discuss the
choices Alexander made and give advice on how he could
save his money to reach his goal of buying a walkie-talkie.
(Book written by Judith Viorst / ISBN: 0-689-71199-9)

Video: What Makes Something Useful as Money?
(Grades 2-5)
This third video in the Exploring Economics animated
series shows items that have been used as money in the
past. It further explains why something used as money
should be relatively scarce, generally acceptable, portable,
durable, and divisible.

The Have a Good Day Cafe (Grades 3-5)
In this lesson, students learn
how businesses use advertising to influence the choices
consumers make. Using
magazines, students see that
advertisements combine facts
and opinions to influence
consumers’ tastes and preferences. Students also listen to
a story about a Korean-American family that owns a food
cart. They learn how the business changes as a result of
competition and how business owners can influence consumers. Working in groups, students create print advertisements for the food cart in the book to see firsthand how
advertisements can influence consumers’ choices through
tastes and preferences. (Book written by Frances Park and
Ginger Park / ISBN: 978-1-60060-358-7)

Tools for Teaching GeoFRED®: Creating and
Analyzing a Binary Map (Grade 6 through adult)
If you’ve never used
GeoFRED® or if it’s
been a while since
you did, you will be amazed at this tool’s ability to map
domestic and/or international time-series data from the
Federal Reserve’s FRED® database. This activity demonstrates how easy it is to master this mapping tool and
walks users through the steps for creating a binary map.
Even the most dispassionate student will be interested in
creating images using the extensive GeoFRED® database.

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Tools for Teaching Economics Using Lawn Boy
(Grades 6-8)
This six-session curriculum corresponds to the book Lawn Boy by Gary
Paulsen (ISBN: 978-0-553-49465-5).
Each session integrates economic
content from specific chapters of the
book. Topics include capital markets,
circular flow, demand, diversification,
supply, markets, opportunity cost,
productivity, and risk.

FEATURED RESOURCES

PAG E O N E E CO N O M I C S N E W S L E T T E R
(Grade 8 through college)
January 2015 Issue (Classroom Edition): “Would a Gold
Standard Brighten Economic Outcomes?”
Historically, money was made of either valuable commodities, such as gold or silver coins, or pieces of paper
(bills) representing these commodities. The United States
severed its last official monetary link to gold in 1971. This
issue describes some of the advantages and disadvantages
of the gold standard.
March 2015 Issue (Classroom Edition):
“Is a Strong Dollar Better than a Weak Dollar?
“Strong” is usually preferred over “weak.” But for the
value of a country’s currency, it’s not that simple. “Strong”
isn’t always better, and “weak” isn’t always worse. This
issue explores some ups and downs of exchange rates
between currencies.

Bring Your Students to Our New Museum!
(Grade 6 through adult)
The economy. Students
hear about it every day,
but how much do they
actually know about it?
INSIDE THE
The Inside the Economy®
ECONOMY
Museum will immerse
M
U S E U M
them in a one-of-a-kind
AT THE
experience that explains
FEDERAL RESERVE BANK
the economy—and their
OF ST. LOUIS
role in it—in a fun and
interactive way. The museum is at the Federal Reserve
Bank of St. Louis and is free and open to the public. Bring
your class! Reserve your spot today.
TM

Video: Bank Supervision and Regulation (Grades 9-12)
Episode 8 in the Fed Explained series explores how the
Fed makes sure banks are operating safely and providing
fair and equitable services to their communities. Other
videos in this series discuss the role and responsibilities
of the Federal Reserve. Each video is contained within
our Instructor Management Panel and includes a
multiple-choice quiz that students may take repeatedly
to improve their score. To view the videos with the quiz,
use your account on the EconLowdown Instructor
Management Panel to view the videos with the quizzes,
or simply view the videos.

The Institute for Financial Literacy
has chosen to honor the St. Louis
Fed as the 2015 Nonprofit Organization of the Year in its ninth annual
Excellence in Financial Literacy
Education (EIFLE) awards.
The Award recognizes and honors
the classroom tools produced by the
Bank’s Economic Education department, with support from Public
Affairs, to help teachers teach and students understand
economics and personal finance.
“This award is a wonderful affirmation of the great work done
by the District’s Economic Education team,” says Mary Suiter,
assistant vice president, Economic Education. “The award
recognizes the quality of the materials we develop and the
extent of our outreach across the country. I am grateful to
leadership at the Bank for their support of our work.”

Historical Inquiry with 75 Years of American Finance
(Grades 8-12)
75 Years of American Finance: A Graphic Presentation, 1861-1935,
is an 85-foot-long detailed timeline complied by L. Merle
Hostetler in 1936 and available for viewing on FRASER®. The
timeline presents key financial-related events of a given
year, condensed on a single page, including innovations,
agricultural prices, constitutional amendments, legislation,
elections, congressional sessions, and even events abroad.
This classroom activity explains the layout of the timeline
and provides historical inquiry questions to evaluate any
year within the timeline. The questions are divided into
these four topics: observe, reflect, question, and analyze.
15

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Inside the Vault is written
by economic education staff
at the Federal Reserve Bank
of St. Louis, P.O. Box 442,
St. Louis, Mo., 63166.
The views expressed are
those of the authors and are
not necessarily those of the
Federal Reserve Bank of
St. Louis or the Federal
Reserve System.

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