Supply and demand with oil prices?

Question

How does supply and demand affect oil prices?

What can we do about the high prices of gasoline?

Answer 1

Well if you ever take an economics course you will find out that as demand goes up, prices go up.  Prices normally can only go so high before the demand starts dropping off.  What companies try doing is regulating the supply so that they can make the most profit.  When prices are higher they increase the supply if they can so they can make more profit.  When prices decrease they decrease the supply so demand and prices go up.  This is basically what OPEC does regarding oil.  They want to get as much money as they can.

However, the oil companies have gotten kind of greedy.  The US government stated a few weeks ago that based on a normal supply and demand curve that gasoline should be at like $1.60 per gallon.  However the oil companies have done a lot to make sure that oil prices keep going up and that they meet their Wall Street expectations.

First, they know that they can keep raising gas prices as long as people don't drastically start reducing the amount of fuel they use or Congress doesn't come down hard on them.  People have to have fuel to get to work, so its not like there's much of a chance that gas usage will go down drastically.  And they can somewhat keep Congress off their backs as long as they have a halfway viable excuse.  But everyday they keep adding new excuses for why it should go up.  Some strike in Nigeria, the summer and fall hurricane season, a refining facility needs repair, the winter home heating season...etc.  They have a reason for every time of the year and everything under the sun.  So most of the increase really is due to speculation and the oil companies setting up their big excuses so they can make more profit.

There are two real reasons that do have some basis as to why it is also going up.  China and India are growing at dramatic rates and using up more fuel and more resources making pretty much every resource go up in price due to a larger demand.  So the US has more competition now for gas demand.  Another big reason is that President Bush highly devaluated the American dollar trying to help big corporations make it easier to sell their products overseas.  Since the American dollar is cheaper that makes American products cheaper to other countries and therefore should make them easier to sell.  However that makes resources and goods more expensive for us and Bush's idea has majorly backfired.  Now the US dollar is worth almost half of what it once was and gasoline costs basically almost three times what it once did.

And then of course you can also blame another part of it on our President.  In the past, President Bill Clinton would open up the oil reserves when gas prices spiked to get the prices to go back down and keep them in check.  Bush only did that once and didn't do it long enough to have basically any affect at all.  Basically all Bush has ever done is do things that help the gas companies make more profit.  And why not?  Where has his family made most of their wealth?  The oil industry.  Big surprise there.

One other thing to keep in mind regarding the speculation is that the stock market is doing bad and that the commodity market just keeps going up.  It doesn't take too long before people start thinking, "Hmmm...I should switch my assets from stocks to commodities."  This makes the commodities such as oil go up even more because the demand for buying them goes up.  And the only reason the price is going up like that is because people are wanting to make a quick buck.  Eventually there has to be a point where the US economy bottoms out and people start buying less gas and you have a crash in the oil market somewhat like what happened in the tech stocks.  Be certain that the rich multi-millionaires will have their computers set to sell so they never get hurt.  But the poor Americans trying to make a quick buck to retire on will get badly burnt and lose a large portion of their life savings.

Answer 2

If the demand for oil at a certain price exceeds the supply the price will rise until supply and demand at that price are equal. the only thing we can do about the price of gasoline right now is to pay it, and it is still on its way up. A year ago oil was at $60 a barrel and gas was at $3.00 a gallon, oil is at $130+ right now and gas is still under $4 a gallon it seems like it has a way to go yet.

Answer 3

Oil  prices have very little to do with supply and demand.

Virtually all commodities are set  by the various world trade organizations ( i.e.  SEC in particular).

Go to commoditiyexchange.com and check out the real  oil prices for the last four years.

Answer 4

When demand exceeds supply prices go up.

In the United States we are going to be in trouble very soon.  The only thing we can do is drastically change our lifestyles.  

We can design vehicles that are solely for transportation not for speed that are designed to be much more fuel efficient and smaller.

Answer 5

When supply doesn't keep up with demand, then the price per unit goes up...in this case a gallon of gas.

Initially, the rising price of gasoline in the US was self-inflicted.  Environmentalists were able to politically prevent new Oil Refineries from being built since 1976 while usage has increased several times over.

In addition, Environmentalists have prevented Offshore Drilling and access to places such as Anwar in Alaska which restricts supply even more.

The government at all levels attach taxes and fees which is higher than that on tobacco and alcohol...all of which is far and above what you pay for other goods and services.

Outside the US, OPEC intentionally restricts oil production when they can agree on anything in order to keep oil prices high and stable.

What is currently driving oil prices higher is that speculators have taken advantage of shortage fears in order to profit.

Good luck, prices won't be coming down anytime soon if they ever do.

Answer 6

Supply and demand don't effect the prices as much as other commodities.  If the price goes down OPEC will compensate for the oversupply by cutting production to bring it back up.  And you can't just bomb the c**p out of the OPEC companies because one of them is Norway.  Most of the other countries will be worthless tracts of sand when the oil runs out so they want to make as much money as possible for a long time.

Answer 7

THEIR'S ANOTHER SOURCE, BUT I'M WAITING ON OUR PRESIDENT TO CONTACT ME. IT SHOULD LOWER OUR PRICES.