What drives petroleum product prices: Production

Petroleum products are primarily produced through the refining of crude oil. Crude oil is heated and separated into various components, based on their boiling points. These components are then further processed through methods such as cracking, reforming, and treating to yield a wide range of petroleum products including gasoline, diesel fuel, jet fuel, and lubricants. Production levels are a primary driver of petroleum product prices. When production is high relative to demand, product prices tend to decrease. Conversely, if production is disrupted while demand remains constant, prices typically rise.

Disruptions to refinery production can increase petroleum product prices

Refinery outages due to hurricanes, fires, seasonal maintenance, or other disruptions can lead to higher petroleum product prices. In a 2023 analysis, we estimated that a high-impact hurricane event could increase monthly average U.S. retail gasoline prices by between 25 and 30 cents per gallon, as was the case in September 2017, following Hurricane Harvey.

Disruptions to production tend to affect regions differently based on a region’s reliance on the affected volumes. For example, refinery outages on the West Coast have often caused significant gasoline price swings because the region relies heavily on its limited refinery capacity to meet demand since it has few alternative sources to quickly obtain gasoline that meets state specifications.

The limited ability of refineries to shift product yields allows prices between products to diverge

Refineries produce a wide range of petroleum products when processing crude oil. More complex refineries can upgrade some of the volume of heavier or lower-quality streams into more valuable products such as gasoline or distillate. Some refineries also have a degree of flexibility with respect to the volume of gasoline, distillate, and jet fuel produced. Price signals can influence short-term production decisions as well as long-term investments to alter the mix of petroleum products produced. Total production of refinery products peaked in 2019 with gasoline consumption and U.S. refinery capacity.

Although production decisions can respond to price signals, the limited ability of refineries to shift yields from one product to another can sometimes allow product prices to diverge. For example, in 2022, the wholesale price of diesel fuel averaged about 50 cents per gallon more than the wholesale price of gasoline. Despite much larger refinery margins for diesel fuel, U.S. refinery yields only shifted slightly toward diesel fuel in 2022—from 29.7% to 30.3%.

Data sources: Bloomberg, L.P., U.S. Energy Information Administration
Note: Real prices are adjusted to July 2025 dollars. Prices are for the front-month futures prices for RBOB and ULSD at New York Harbor. Refinery yields in 2020 were skewed due to reduced refinery operations.