This indicates that there are a number of factors other than oil prices that dictate price fluctuations in gasoline.
The factors that drive gasoline prices are complex and encompass international crude oil inventories, national wholesale product price discounting, inflation, domestic retail competition and federal taxes (Borenstein, Cameron, & Gilbert, 1997). The description and influence of the following factors on gasoline prices are described below:
Price of Crude Oil: Reports from Federal Trade Commission recognize that changes in crude oil are the major contributing factor of the variability of gasoline prices. Crude oil prices, in turn, are reflective of supply and demand imbalances across the world, especially triggered by production levels set by OPEC countries. Rising demand in developing economies such as China and India also affect the supply and demand for crude oil.
Infrastructure Issues: In the United States, the availability, consistency, and prices of gasoline are intricately linked to its production and delivery infrastructure such as transmission lines, processing plants etc. and are also a driver of gasoline prices.
Weather: Many times, colder than normal weather patterns are responsible for short-term volatility in gasoline prices since fluctuations in weather can change (rise or fall) the demand dynamics of the commodity.
Speculative Trading and Market Manipulation: Presence of unreliable price data and large price movements attracts the attention of speculators and hedge funds that see market volatility as an opportunity to make the profit. Speculative tradition can further cause gasoline market to be imbalanced and hence cause high price differentials.
In case of premium coffees, it is assumed that the coffee market is currently in a state of equilibrium, i.e. the supply and demand for the product balance one other.