Imagine: you are on a road trip, one which will take you and a couple of friends from Atlanta to San Francisco. You've roughly estimated your budget – gas, food, lodging. Your route is not a direct one, since this road trip is more about the road than anything. In Atlanta you fill your gas tank at $1.28 a gallon. In Mobile, you fill up again for $1.26. Once you cross the Texas line, you top off your tank at $1.22. A few tanks later in Tuscon, it is $1.33. Upon reaching California, you are routinely paying $1.50 or more. Paying varied amounts for gasoline at the pump is nothing new, but until this trip, you were unaware at just how big the disparity is from place to place. What makes gasoline prices fluctuate so greatly from day to day and from region to region? Here is a basic breakdown of how those prices are determined.

Recently, I received an e-mail from a high school classmate whom I had not heard from since 1993, the year I graduated. "Won't you come to our tenth reunion next year?" she said – and it got me thinking how it seems like yesterday when all my cares in the world were centered around myself; winning baseball games, summer jobs, trying to learn the periodic table, and discovering all the wonderful things that girls have to offer. During my sophomore year, however, I had a bit of a wake up call – George Bush had declared war on Iraq, and Operation Desert Storm was underway.

It was really the first time I paid attention to the news. I was hooked on CNN, though I never fell for that smarmy Arthur Kent. Images were put on the television screen in almost real time, and one image stood out at the time, the billowing clouds of thick black smoke created by the burning of the oil wells. Americans, perhaps more than ever before, were asking questions about our dependence on foreign oil.

We certainly do depend heavily upon foreign oil. We use gasoline for everything: automobiles, lawnmowers, snow blowers, any number of yard machines. One day, a gallon of gas costs, say, $1.26; the very next day it is $1.29. Or $1.22. The economics of gasoline is unlike most other products we consume in that there is no predictable inflation to continually drive prices up at a steady rate. Most Americans (myself included) have no earthly idea why this is so. But, like everything there has to be a reason, right? I have endeavored to find out for all of us, so here goes:

There are four basic elements that determine gasoline prices: the cost of crude oil to refiners, refinery processing costs, marketing and distribution costs, and taxes and costs of the retail stations where you and I buy gasoline (Energy Information Administration). Generally, the crude oil cost comprises the largest percentage of the price of a gallon of gasoline, usually between 37-46% Taxes are next, usually around 28%, and these vary from state to state and even from city to city. Nationally, the average per gallon is 18.4 cents in Federal and 20 cents in State taxes (U.S. Dept. of Transportation).

Refining costs are next at about 14%, and this too varies greatly by region, as different parts of the country have different refining standards which affect the refining cost. California has by far the most stringent standards for refining crude oil, as they require much cleaner fuel than other states. It is for this reason that they must refine their own oil, and with just enough refineries to supply its large, gasoline-thirsty population, any operational problem at a refinery can cause their prices to soar overnight.

Distribution, marketing and retail station costs make up about 12%. Refineries pipe the gasoline to local distribution stations, where it is loaded into the trucks you see on the road. The price you and I pay at the pump is determined by the retail station, taking into accounts their operating costs, location, competition with other stations, and probably a thousand other factors.

Gas prices also change with the seasons. People drive more during the summer, and with this greater demand (about 6% more) for gasoline, up go the prices because we are importing more crude oil, refining and distributing more. Assuming a static price of crude oil, gasoline prices normally rise five cents or more during the summer driving season.

Of course, crude oil prices never seem to be static for long. Since we import so much of it from other countries, events in those countries which disrupt the supply lines can cause prices to fluctuate. Some notable examples of this are the Arab oil embargo in 1973, the fall of the Shah in Iran in 1978, the Iran/Iraq war in 1980, and the aforementioned Gulf War in 1990 (Energy Information Administration). In these cases, while oil may not always have been the issue, the supply lines were disrupted and thus the price of crude oil soared.

The price of crude oil itself is determined by worldwide supply and demand, but not without a lot of influence by the Organization of Petroleum Exporting Countries (OPEC). OPEC's membership accounts for about 40% of the world's crude oil, and more significantly, holds 2/3 of the world's oil reserves. By putting a limit on the oil production of its members, OPEC has a lot to do with crude oil prices worldwide.

Of course, at the root of our wild gasoline prices is our insatiable demand for the stuff, a demand which becomes greater and greater over time. In America, even poor people drive cars, and as a populace we are driving more cars than ever. We are used to being comfortable, and comfortable cars guzzle gasoline. We complain when gas prices rise, but our constant need for it is really the most significant factor determining cost. We are the most powerful nation in the world, but through our need for crude oil we are forced to rely upon unruly, unstable nations, some of whom hate us intensely. It is time for our beloved internal combustion engine to go.

Last time I filled up the price of gasoline (in Atlanta, GA) was $1.28/gallon. Consider this: if your car ran on bottled water, it would cost about $7.50 a gallon. Milk? About $3.50 a gallon. Tonic water? Maybe $2.50 a gallon. But be glad your auto doesn't run on Jack Daniel's – it's about $95.44 a gallon. Compared to what we spend on everyday things, is $1.28/gallon really that much more? Think about it.

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Zak Billmeier grew up in Vermont and Maine, and currently resides in Atlanta, GA. He graduated from Mary Washington College with a B.A. in geography in 1997. At Mary Washington, he was an infielder on the baseball team, the editor-in-chief of the weekly newspaper, and a public address announcer at other sporting events. He is a rabid Boston-area sports fan. Also an active musician, he plays the bass for the little-known Atlanta band The Shadowridge Runners. His interests include sports, music, painting, reading, writing and photography.