EIA analysis of the petroleum market points to the cost of crude oil as the main contributor to the large run up in the first half of 2008 and the recent decline in retail gasoline prices.

The cost of crude oil accounts for about 76% of the gasoline pump price (see graphic on gasoline price components). The cost of crude oil for U.S. refiners reached a record high in early summer 2008 (as did retail gasoline prices) due mainly to high worldwide oil demand relative to supply. Other contributing factors included political events and conflicts in some major oil producing regions, and other factors.

EIA believes that the high prices for petroleum products and relatively weak economic conditions in the U.S. and other countries has helped to reduce demand and prices for crude oil. This has contributed to the recent decline in crude oil and retail gasoline prices.

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