Factors Affecting Fuel Prices

Factors Affecting Fuel Prices and Set Price Per Liter

Fuel price is directly related with economic growth and development of a nation. Crude oil is priced in barrels. 1 barrel of oil is approximately 159 liters. The price that is paid at the pump (Petrol Pump) for a liter of Petrol is a combination of costs. Start with the base price of a liter of Petrol (varies from time to time), but  whatever price pay for a liter of petrol only 1/3 of the price goes for the raw material (Petrol / Crude). 2/3 of the price per liter is a combination of Refining, Taxes, Transportation & Distribution cost and  plus a small commission paid to the Petrol Pump owner/ distributor.

There are approximately 10,000 different types of crude oil in the world, and they vary greatly in composition, liquidity, gravity, sulfur content and other factors. For example one type of crude (SantaMaria Crude in California) is of 2 gravity and comes out of the ground just like black tar. And there are crudes in South West Louisiana that are around of 60 gravity that are clear and pour like water and are made up mostly of Naphtha, which are a combination of low octane motor fuel and kerosene (No 1 oil).

The cost of processing crudes can also vary based upon so many factors, like the qualities of the feedstock crudes and the desired product mix out the refinery gate. For example the cost to process SW Louisiana crude into kerosene and motor fuel is very low. But the cost to process Santa Maria Crude into kerosene and motor fuel would be so complicated, and so costly that it is rarely done.

After processing costs depend on the refineries. For the largest refinery in the world their margins are $11/barrel but it might be as high as $18–20/barrel. Component costs depends on the petroleum products extracted by the refinery and the type of crude oil bought. There are dozens of petroleum products that are produced from crude oil like Petrol, Kerosene, Aviation fuel, LPG, Naphtha, Diesel, Fuel oil, Lubricants, Paraffin wax, Asphalt etc.

The cost of refining crude oil into petrol (gasoline) can vary widely depending on several factors, including the location of the refinery, the complexity of the refining process, and the current market conditions. Here are some general points to consider:

1.   Refining Costs: The refining cost for producing gasoline typically ranges from about $0.10 to $0.30 per liter. This cost can be influenced by the crude oil prices, operational efficiencies, and the technology used in the refinery.

2.   Crude Oil Prices: The price of crude oil itself is a significant factor. Crude oil prices fluctuate based on global supply and demand, geopolitical events, and market speculation. Higher crude oil prices can increase the overall cost of gasoline.

3.  Other Costs: Additional costs include transportation, distribution, marketing, and taxes, which can significantly affect the final price paid by consumers at the pump.

4.   Regional Variations: Costs can vary significantly by region due to differences in local regulations, taxes, and market dynamics.

In summary, while the refining cost alone might be around $0.10 to $0.30 per liter, the final cost of petrol at the pump will be higher when accounting for all additional factors.