Why are gas prices so high, and why are they going higher, to $6/gallon?

Question

Why are gas prices so high, and why are they going higher, to $6/gallon?

Answer 1

It should level out sometime within the next twelve to twenty four months. I would look at the price of oil per barrel to drop back to around $110 per barrel on the stock market in that time span. That would make gas prices here in the U.S. around $3.15/gallon. Gas prices should suspend around the price range of $3.00 to $3.50/gallon then for the next ten years before another spike in prices due to lower supply from oil producing countries. As for now though, I wouldn't be surprised if we hit a peak of $175 to $200 per barrel within the next twenty four months before there is a drop.

The biggest reason that gas is so high is because of the simple model of supply and demand. Before the 2000's, the demand of oil did not greatly exceed the supply of oil. But several events changed the demand and supply of oil. The first being new players in the game. China and India are new comers to becoming economic powers in the world. With China and India's population buying cars and fueling their industry, they're using a big chunk of the supply of oil that's available.

Secondly, is oil production as a whole. There are different types of crude oil, so it becomes more costly to turn crude oil that's not even close to being gas for our vehicles. There's alot of that type of oil. There's not much good oil that's almost ready to turn into gas, which would be less production cost and less you have to pay at the pump to compensate that.

Next, is the value of the dollar. the dollar is losing its value. You can blame alot of that on Greenspan in the '90's and Bernanke here in the 2000's for lowering interest rates too much. Lowering interest rates can be good, it spurs spending and increases money supply, but if used to much and not watched close enough, tends to increase inflation. This is a negative side effect because the total supply of goods and services is essentially finite in the short term, and with more dollars chasing that finite set of products, prices go up (oil, food). If inflation gets too high, then all sorts of unpleasant things happen to the economy.

Lastly, since 2003, we went to war with an oil producing country and since then, we haven't been able to set Iraq up to produce oil to help with the increasing demand. Putting death threats on Iran hasn't helped either.

So how will oil prices drop? There's several ways. Increase supply. Increasing the supply will help out termendously in the short term, although in the long term, hurt the countries that increase their supply because it could dry up and take their economies with it. That's why countries like Saudia Arabia are apprehensive about increasing supply. They want to milk it for what they can so they don't s***w themselves over.

Another way is for the U.S. to begin drilling again on its own property and look for new sources of energy. It's been said that the Artic Ocean region has 25% of the worlds untapped oil. That's alot. Russia and the U.S. are already looking into it. Alaska is just the tip of the iceberg. Offshore drilling off the coasts of the U.S. mainland would help too. Of course creating new sources of energy. If we could come up with a new, safe, popular energy, our demand would decrease and oil prices would fall.

Increase the value of the dollar. If the dollar gains strength, inflation would be kept under control, and the cost of goods, including oil, would be under control. It's time to raise interest rates again.

Lastly, get Iraq running so they can contribute, and leave Iran alone. If we can get Iraq to run itself and start contributing its oil to the world, and if we stop making military threats at Iran, supply would increase and oil prices would fall.

Answer 2

Because the powers that be will have there profit.  Who, after all is going to stop them?

Answer 3

because the people who owe the oil is making it harder and harder to get oil.

Plus states are competing with other countries over the oil. In london a gallon of gas is like $14 if you convert in to our money.

Answer 4

You can find a quick FAQ regarding todays high gas prices below. Hope it helps.