Why Are Gas Prices so High?

The most common story is that it's a result of the surging demand from China and India and not enough oil supply from Nigeria and Iraq. And let's not forget the decline of the dollar that has also put pressure on these oil prices. In 1978 the price of a barrel of oil was around $13.55 a barrel. With the combination of the Iranian revolution and the Iraq-Iran War caused oil prices to more than double from $13.55 in 1978 to $35.00 a barrel in 1981.

So then, how did we get to $145.78 a barrel today? One barrel of oil (approximately 42 gallons crude) refined makes about 19.6 gallons of gasoline. The remainder of this goes to fuel oil,plastics,jet fuel, propane and asphalt. As is with everything else you buy, it is also priced according to supply and demand. One other thing is that they are affected by oil price futures. These are traded on the commodities futures exchange. Prices fluctuate daily according to what investors think that the price will be in the future.
Some traders are driving up the price of oil even though in reality, the supply has increased and the demand has fallen.

Now let's consider the taxes involved here. Taxes are 19 % of your gas prices. Refinery costs also have 19 % taxes, and distribution costs are 9 %. The latter two taxes cannot be lowered as they are fixed.
Normally summer prices on a gallon of gas increase about ten cents a gallon due to vacation driving.