How do crude oil prices affect gasoline prices?

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The price of crude is one of many determinants of gasoline prices.

© Edelweiss, DusanJelicic/stock.adobe.com; Photo illustration Encyclopædia Britannica, Inc.

When crude oil jumps, gasoline prices typically follow. After all, crude is gasoline’s main ingredient. And when that input gets pricier, the whole supply chain—from refineries to your local gas station—starts to feel it. Eventually, you do too.

But the relationship between crude and gasoline prices isn’t one-to-one. There’s a middle process, in which petroleum is converted into gasoline and other refined products like diesel and jet fuel. The difference between the cost of crude and the finished products is the refining margin, or what futures traders and industry insiders call the crack spread. It’s a key driver for what you ultimately pay at the pump. In fact, gasoline prices can even rise when crude oil is stable (or falling!) if refining margins expand.

Put yourself in the position of a refiner. As crude oil is “cracked” into products like gasoline, diesel, jet fuel and petrochemicals, two key prices matter: what you pay for crude, and what you can sell those products for.

As a refiner, your profit lives in the spread between these two prices. 

To estimate your potential gasoline and distillate revenues, you use the standard industry 3-2-1 crack spread. These numbers represent 3 barrels of crude, 2 barrels of gasoline, and 1 barrel of distillates (e.g., low-sulfur diesel fuel or heating oil). 

Because oil benchmarks are priced by the barrel (42 gallons), gasoline and distillate (e.g., diesel fuel or heating oil) prices are first converted to a per-barrel basis (×42), then plugged into this formula:

Crack spread = [(2 × gasoline price) + (1 × distillate price) – (3 × crude oil price)] ÷ 3

That last part, dividing the figure by three, gives you the value of the spread on a per-barrel basis.

Here’s a quick example. Suppose crude oil is at a high $102.91/barrel, gasoline is at $4.16/gallon, and distillates are selling at $5.67/gallon.

Crack spread = (2 × 174.72) + (1 × 238.14) – (3 × 102.91) divided by 3 = $92.95 a barrel

Dividing $92.95 by 42 gives you about $2.21 per gallon of crude processed—an estimate of the refining margin across the mix of products. This isn’t the price of gasoline, and it’s not pure profit. It’s a rough measure of the spread between crude oil and the fuels it becomes. For consumers, that spread is just one piece of the puzzle. What you pay at the pump depends on how those wholesale prices filter through—and on a range of other costs layered on top.

Roughly 50% to 60% of what you pay at the pump reflects crude oil. The rest comes from refining, distribution, and taxes. Here’s a rough breakdown, followed by an example from January 2026 (see figure 1):

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Figure 1: CRACKING THE COST STRUCTURE. The prices of gasoline and diesel fuel can be broken down into crude oil, refining, distribution and marketing, and taxes.

U.S. Energy Information Administration

There’s a saying that gas prices take the elevator up and the stairs down, meaning prices rise fast but fall slowly. Many people assume that retailers are quick to raise prices to maximize profits, and slow to lower them for the same reason.

But there’s a more practical explanation.

When crude prices rise, wholesale gasoline prices have to adjust quickly. This means gas stations raise prices to avoid selling fuel below what it will cost to replace it. The “pain at the pump” you’re seeing reflects anticipated replacement costs—what retailers expect to pay to restock the tanks—and not just the current spot price.

When prices fall, it’s a little different. Some stations are still selling fuel they bought earlier at a higher price. So they need to lower prices more gradually to make sure they don’t sell it at a price that would cause a loss (remember, they bought it at a higher price).

That’s why gas prices tend to rise quickly but fall more slowly—“elevator up, stairs down.” Part of that reflects simple economics, but it also echoes a familiar behavioral pattern: a reluctance to realize losses.

Ever notice how gas may be cheaper or more expensive depending on where you fuel up? There are a few reasons for that.

Transportation costs. Depending on where a refinery is located relative to your local gas station, transportation may require a truck, pipeline, or rail—or all of the above—and each one adds something to the price you eventually pay. Also, local supply conditions play a part. For instance, if a key refinery goes offline, prices in that region can spike rather quickly.

Differences in fuel specifications. Some states, like California, require cleaner-burning blends. These cost more to produce, and because they’re in more limited supply, prices there are often higher than in other parts of the country.

Taxes. Taxes don’t drive short-term moves—they’re relatively stable—but they all differ from region to region and make up part of the difference in regional gas prices.

Gasoline prices don’t just reflect what’s happening in the crude oil market—they reflect expectations about what might come next.

That’s why prices at the pump can move ahead of changes in crude, stick around for weeks after costs fall, and vary so much from place to place. What you’re seeing isn’t just today’s price of oil. It’s a mix of replacement costs, local conditions, and a supply chain that’s constantly adjusting in real time.