How is the price of oil determined? And who sets the price at the pumps?

I know oil is currently around $100/barrell but who sets this price and is this just the U.S. price or international? If the price of oil is the same internationally, it seems the price at the pumps should also be the same but they aren't.How is the price of oil determined? And who sets the price at the pumps?
Wow this is really convoluted.


Simply put oil is a publicly traded commodity like gold or sugar. Traders buy and sell ';future contracts';, or what they think it will sell for at a set date in the future. That sets the price of a barrel of oil worldwide.


Greatly effecting that price is the supply OPEC chooses to sell. More supply = lower prices / less = higher prices. Whew hang on there's lots more.


Supply and refining capacity can dramatically effect retail prices. Examples are Hurricane Katrina and BP's rupture of the Alaskan pipeline. During Katrina we couldn't turn oil into gasoline fast enough so prices rose, w/ BP's failure we had refineries with no oil to refine oddly enough also causing prices to rise.


Hang on we're closing in on it, once the oil companies figure all this out they add the expense of getting gas to your area (cheap in Texas expensive in the Northeast) they set prices to station owners and federal and local taxes are added (local taxes vary widely, I live in CT the 2nd highest gas taxes in the US Yea!!!) and you get to pull up to the pump and $#!% yourself.


The main reason gas prices vary so widely world wide are taxes. Most European, Asian and South American countries add HUGE taxes to promote conservation. It is a rule of thumb that they pay the same price for a liter as we pay for a gallon, not so many SUV's in Chile, Burkina Faso or Serbia.


Secondarily is the added cost to supply many forigen countries and todays ridiculously long explaination is concluded.How is the price of oil determined? And who sets the price at the pumps?
It's all speculation. The markets worry about what might happen down the road. The current market really support these prices. But i can tell you that $4 a gallon this summer is unavoidable. I work for British Petroleum, so i have an inside track on this info.
Oil is traded on multiple markets. These markets always keep in very close step. These provide the price for oil to be delivered in future months (futures contracts). They are saying that they will pay $98.00 for oil delivered in February.





Separate from crude futures, you are talking about gasoline. There are a number of refiners out there, who sell gasoline to independent dealers. It is possible to have a short-term surplus in gasoline while being short on crude oil, and vice versa. Pump prices depend on the price of gasoline, which is influenced by oil prices.





Some countries subsidize gas costs, other put heavy gas taxes on it. This can radically change costs.