Inflation and taxes account for the biggest relative increases in the price of gasoline.
Inflation
Inflation is the general rate at which prices of goods/services are rising (and, conversely, the rate at which purchasing power is falling). In the U.S., an item that cost $1 in 1950 would cost about $8.78 in 2008. In 1950, gas cost about 30 cents per gallon. Adjusting for inflation, a gallon of gas should cost about $2.64 in 2008, assuming taxes, supply and demand stayed the same; according to the Energy Information Administration, the average U.S. gasoline price for 2008 as of August 2008 was more than $3.50 per gallon. The level of inflation varies by country, which can influence the price of fuel.
Taxes
The tax on a gallon of gas in 1950 was approximately 1.5% of the price. In 2008, the federal, state and local tax on a gallon of gasoline was approximately 20% of the total price. This means that taxes added about 49 cents to the price increase in a gallon of gas during this period. Other countries have vastly different tax policies for gasoline, some of which can make taxes the largest price component.
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