EIA analysis of the petroleum market points to the cost of crude oil as the main contributor to the large run up and subsequent decline in retail gasoline prices in 2008.

High worldwide oil demand relative to supply, political events and conflicts in some major oil producing regions, and other factors pushed the cost of crude oil for U.S. refiners to a record high in early summer 2008. EIA believes that the resulting high prices for gasoline and other petroleum products and relatively weak economic conditions in the U.S. and other countries have helped to reduce demand and led to the general decline in prices for crude oil and gasoline starting in mid-summer.

Some areas of the country experienced a spike in gasoline prices in August and September due to the impacts of Hurricanes Gustav and Ivan on Gulf Coast refineries and a major gasoline pipeline supplying the Eastern US.

This Week In Petroleum often discusses gasoline prices.

• The February 27 edition discusses how crude oil price affect gasoline prices.
• The August 13 edition discusses declining petroleum consumption.

For EIA's latest gasoline price forecast, see EIA's Short-Term Energy Outlook

U.S. households are projected to spend an average of $971 per household, for heating this winter, a decrease of about 2% over last winter. Households using heating oil and propane are projected to spend less for heating than last winter.

Forecasts (as of December 9, 2008) for average winter heating expenditures and the percent change over last winter, for households heating with:

• Natural gas – $860 per household, 0.2% increase
• Heating oil – $1,570 per household, 19.6% decrease
• Propane – $1,472 per household, 12.4% decrease
• Electricity – $929 per household, 7.9% increase

Projected heating costs this winter–residential heating fuel prices by region (PDF)

How do I compare heating fuels?

Last updated: December 9, 2008

The cost of crude oil is a major component in the price of diesel fuel, gasoline, and heating oil. But there are other factors that affect retail fuel prices. Prices are determined by demand and supply in our market economy.  Fuel demand is affected mainly by economic conditions, and for heating oil, the weather.  Supplies come from refinery production, imports, and stocks (inventories.)

Suppliers price their products based on actual and expected demand relative to available and expected supplies over the short and longer term.  Since stocks are the main buffer between short term demand and supply, stock levels are a major factor in fuel pricing.

Reductions in fuel supply, especially when demand is high, can cause prices to increase and to remain high even if crude oil prices drop.  On the other hand, even if crude oil prices are increasing, retail fuel prices may not increase as much, or may even fall, if existing and expected fuel supplies are high relative to demand.  The rise and fall of crude oil and gasoline prices over the past year help to illustrate these points:

• Retail gasoline prices increased an average of 82 cents per gallon more in the first 7 months of 2008 than in the same period in 2007, while crude oil prices increased by 119 cents per gallon.  Adequate supplies and slowing demand for gasoline meant that much of the crude oil price increases were not passed on at the pump.
• High prices caused people to buy less gasoline, and gasoline and crude oil prices began falling in mid-July.
• In September, Hurricanes Ike and Gustav caused several Gulf Coast refineries and a major gasoline pipeline supplying the Eastern U.S. to shut down. These significant supply disruptions drove gasoline prices up in many areas of the country for several weeks, even as world crude oil prices were dropping. 
• As of mid-October, the supply situation improved and gasoline prices began falling along with oil prices.

EIA offers brochures on gasoline, diesel fuel, and heating oil prices and a detailed primer on oil markets and prices.

Last updated: November 7, 2008

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