What Causes the Price Of Gas To Rise?
Even though there are issues throughout the world. Has the war on terror has put stress on the United States’ relationship with the Middle East? Why does the killing of Muslim extremists causes the price to sky rocket? Why do we continue to put so much dependency on oil? These questions boggle my mind knowing that we have the capability of pooling our resources and begin to find alternative fuels. The technology is attainable but the public needs to accept alternative fuels.
Gas prices have been skyrocketing all over the world, but what makes this happen? The first thing we need to look at is how the price of a gallon of gas in generated. The price of gas in April averaged $2.74 per gallon. We need to break down that price to see exactly where most of the cost comes from. The price per gallon is broken down as followed: 17% taxes, 3% distribution and marketing, 26% refining, and 54% is the cost of crude oil. Rising crude oil is a major reason we see a large increase in price at the pump. In January 2005 the price of West Texas crude oil was $50 compared to the price in April 2006 of $70 per barrel. This increase alone can account for $.25 per gallon to the consumer. Lower gasoline refinement has also contributed to the rise per gallon. This lower production can also be related to mother nature. Hurricanes like Katrina and Rita last year damaged refineries and most are still not up to full capacity. Most refineries still have not reached the capacities pre Katrina and Rita so production of gasoline still remains low.
Demand for gasoline over the spring and summer still is a major factor for the rise in cost of gasoline. Many people travel with road trips, flying and trains to their favorite vacation destinations.
Requirements for cleaner burning fuels can also be attributed to the cost of gasoline at the pump. As the government pushes oil companies to help clean up the environment the conversion of mixing some gasoline with eternal has taken a toll. This is a more expensive gasoline blend and the distribution and conversion of the terminals caused a increase in the price per gallon of gas.
Taxes change from State to State depending on what the local legislature sets. Most States use the taxes of gasoline to pay for roads and mass transit systems. Mass transit systems help keep vehicles off the roads to relieve congestion. As Marc Fisher writes (2006) in the Washington Globe “Even at $3 a gallon, we have some of the cheapest gas in the industrialized world, primarily because our taxes are so low.” This I guess can be a better way of looking at it. This may prove that our Government is not taxing us like some other countries do. Marc Fisher also writes that $3 per gallon of gasoline has not drastically changed most of our driving and living habits. People seem to find the money to pay for the increase in gas. Interesting enough does this mean that people do make due with what they have? Is the American Society simply distributing money from leisure to necessity or is there enough money to go around? With all these price increase and major contributors to the price what will affect the price in the future? President Bush met with Congress on May 3, 2006 to discuss energy policy. President Bush said talked with Congress on how to deal with America’s energy problem. They talked about how the American people should be treated fairly and to hold companies or individuals accountable if they are not fair to the American consumer. They talked about alternative vehicles like the hybrid. They all agreed that their should be tax credits to anyone purchasing the hybrid vehicles to help relieve gas consumption. Discussed was the research into alternative fuels like ethanol. The discussion of ways to encourage distribution and production of ethanol based fuels. Vehicles should also be available to run this alternative fuel for consumers. As volume of consumption of this alternative fuel increase then the price and distribution could become even cheaper. New batteries that could run on the first 40 miles of travel on vehicles was also discussed. This would save consumers a lot of gas mileage with the increase in use of these new batteries. They also spoke about new refinery construction to increase the volume in which crude oil can be processed into gasoline. President Bush has also released some reserves of barrel of oils to the consumers. With the release of these barrels the hope is to give the American people some relief at the pump. President Bush has acknowledged that America’s addiction to oil is a matter of national security concern. President Bush has not been without his critics thought. Democratic Senator Schumer accused President Bush of failing to gettough with oil companies. Oil companies delivered record profits in 2005 including Exxon Mobile with $36.1 million dollars. With all these factors that effect the price of gas at the pump. It is clear to see that the Government is recognizing that there is a financial problem in our society. With increase pressure from the US citizens I am sure that the future can be bright for alternative means for travel and lower prices at the pump.
7 comments
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Karen Halls
thanks for this info
I found this article to be informative, but I do disagree with some statements. Americans are going to find a way to pay for the necessities in life, but this hike in oil is creating an increase in credit card debt and reduction in retirement planning. The argument that oil refineries are not running to full capacity would not justify what we see at the pumps. I believe I saw that the price of a gallon of gas in Egypt was near $.50 and if that is the case, I don’t see the percentages that you sent adding up to the $4.00 I pay outside of Philadelphia.
With extremely high gas prices straining consumers pockets in recent months, it is only natural for people to wonder where all the money they pay at the pump goes..Source:
http://fuel-savermagnetic.blogspot.com/
It is unbelievable to me how people can speak with such authority without doing any real research and without having any supporting evidence. What’s more, if you want to speak with authority you might consider learning the English language so you can write with some degree of competence.
To wit:
Re:
“The technology is attainable but the public needs to accept alternative fuels” and “New batteries that could run on the first 40 miles of travel on vehicles was also discussed. This would save consumers a lot of gas mileage with the increase in use of these new batteries”
Are you aware that the construction of these batteries is actually using more fuel in the factories which construct them than the amount which is saved? Alternative methods of fuel is paramount, but to blindly (and un-informedly) suggest that we go out and buy batteries is simply irresponsible. Fuel consumption from the increased production of the current batteries would rise!
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“Discussed was the research into alternative fuels like ethanol.”
So? Which means what…that we’re talking about how to come up with alternate means of fuel? This is news? And what does it have to do with the subject of the stated topic: What causes the price of gas to rise?
What is more, are you aware that the incentives to grow corn for the purpose of fuel is causing such a dramatic effect on the agricultural industry (because we use corn for much more than cobs on our dinner tables) that it is driving up the prices of food across the board? If we save money on the price of gas from this genius solution, does it offset the rising cost of food prices? Where is your research to answer that question?
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“Most refineries still have not reached the capacities pre Katrina and Rita so production of gasoline still remains low. ”
Hmm…what is the definition of “low”? What is the percentage of American consumption accounted for by these relatively small, insignificant refineries? Has this actually had any significant impact on the price of gas? Prices at the time of this entry are at $4.17 per gallon. These refineries, at full capacity, would affect this price by what…a couple of cents? This does not seem to have a major impact on your stated topic.
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“Demand for gasoline over the spring and summer still is a major factor for the rise in cost of gasoline. Many people travel with road trips, flying and trains to their favorite vacation destinations.”
And they didn’t do that last year…or the year before…or the year before that? This accounts for *seasonal* fluctuations in gas prices…and always have. This has nothing to do with the rising prices of gas over the past several years.
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“They talked about alternative vehicles like the hybrid.”
Again…what does this have to do with explaining the rising cost of gas? All it does is try to find a way to offset the rising cost, not *explain* it. We’ve all heard for years that we need alternative sources. This offers nothing new, and completely overlooks trying to explain how we got in this position in the first place…which the title of this paper claims is its intent.
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“President Bush has also released some reserves of barrel of oils to the consumers. With the release of these barrels the hope is to give the American people some relief at the pump.”
Again…how much will be released? How much is even *available*? Are you aware that even if we released all the reserves we have it would not have a significant impact on the supply of oil such that the prices would come down to levels even close to those of just a few years ago. How much consumption is there in the United States? What percentage of oil would these reserves constitute?
And yet again…what does this have to do with explaining why the cost of gas has sky-rocketed? It only offers a method of bringing the price back down (albeit insignificantly).
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“Oil companies delivered record profits in 2005 including Exxon Mobile with $36.1 million dollars.”
Uhh…$36 Billion. Billion. You couldn’t even get that “fact” right.
Frankly, I could go on and on, but I won’t. I respect your hope to shed some light on an important topic. Your heart is in the right place. But a major problem in the world today is that masses of people are “learning” from incompetent teachers. If you don’t really know what you’re talking about…keep your “teaching” to yourself. It’s hard enough teaching the truth. It’s even harder trying to unlearn all the misguided “facts” people are subjected to.
Very helpful information… Thanks for sharing…
what a bunch of crap. the only thing that changes is the cost of crude oil, so explain why when crude oil is at $110 a barrel gas is $4.00 a gallon and when crude oil drops to $70 a barrell, that is over a 40% drop, we should see a 20% drop in price, or .80 cents per gallon it went down about .25 cents yet when crude oil goes up we see a direct correlation. in other words accoding to your numbers… gas was $1.25 a gallon crude oil was $55 per barrel so at $110 per barrel gas prices should have gone up to $1.92 a gallon yet it is more than double that. we are getting taken by the oil companies and there is nothing we can do about it. Please don’t pretend that it can be explained by giving a lot of lies and facts that don’t even have anything to do with it.
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