Why are Gas Prices so High?

I have noticed the cost at the pump doing something strange in the past week-it has been steadily going down.  I paid $3.36 per gallon 2 weeks ago and that was actually on a day when gas less expensive, then within a few days started watching gas prices go from $3.36 and jump rapidly down to $3.18 per gallon.  It is a shame to say that I was elated at the thought of $3.18 per gallon gas prices when I remember 5 years ago paying $2.28 per gallon.  In 2006 gas prices rose to over $3 per gallon and have not dropped below since.  It seems that  seasonal summer demand was greater than ever, the price of crude went up as did the cost of ethanol.  

The demand for oil has never been as high as it is these days.  And one of the main reasons for this is the continuing rapid economic growth of China and India, the two largest economies of the developing world.  Consumers and individuals in both countries are using energy at an increasing rate.  In the United States people continue to drive gas guzzling vehicles such as SUVs.  The United States and Europe continue to grow economically which generally means an increase in demand for oil.

Politics, geography and supply problems may also contribute to the rise in gas problems over the last few years.

“For example, the war in Iraq has resulted in reducing oil production there, as has also happened in Nigeria due to rebel activity. The continuing nuclear weapons wrangle with Iran, the government increasing its control over industry in Russia, and the oil companies being nationalized in Venezuela has given rise to misgivings about future supplies.”  states  Rita Patatunda

Offshore drilling is more costly and many of the places that were easy to drill in the United States have gone dry;  this increases the cost of the United States to produce oil.  Stations try to meet the demand for fuel by keeping enough supplied, but cannot predict how much they will have to pay for the next tanker of gasoline.

“… oil that made the gasoline that customers are putting into their cars today may have only cost $85 a barrel, but the oil that makes the fuel that will replace it will cost a lot more. Customers, then, are paying more now to cover the station owner’s cost in the future.” says Hazel Sanchez of CBS New York

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