Why is gas so high when we have abundant supplies of fuel.?

Question

do you beleive that this part of the earths resources are running out forcing us to try and steal from other countries?

Answer 1

Demand for oil is higher than ever and production has declined in almost all of the world's countries.  Why do you think we have abundant supplies?

Answer 2

We've all experienced the shock, frustration and anger that "gas-price grief" has given us. After all, our country is dependent on the "Black Gold", crude oil. Without it, our economy would crumble. Let's explore the insides of gas pricing and how you can get an edge in the marketplace.

Unstable conditions throughout the world create uncertainty within the global marketplace. Wholesalers may not know if they'll receive the much needed oil. Consequently, wholesalers are willing to pay more to secure their share in the marketplace.

With the unsettling events in Iraq, Venezuela and now Saudi Arabia (oil producing countries), the uncertainty of acquiring oil rises on the global marketplace. The potential for supply drops increasing the demand, and the gasoline price increases. This is just the beginning of why are gasoline prices so high.OPEC, the international organization, is another reason why are gasoline prices so high. OPEC can simply cut their oil production as we have seen recently. Supply is dropped yet the demand is high. This is business 101, the supply and demand principle. Low supplies with high demands yield increase prices. This is true for any product and we clearly see it within the gasoline price in the marketplace.

As the OPEC nations reduce supplies, other non-OPEC countries may increase their supplies, thus increasing their profits. Occasionally, even an OPEC country breaks away from the OPEC agreement of reducing oil supplies and increases their production. This is often done without the consent of the other OPEC nation.

Globally the demand for oil has increased.  This is a major reason why are gasoline prices so high. Within the United States the economy has continuously risen with a few glitches here and there. In the early 70's, I worked at an independent gas station pumping gas at $0.18 per gallon. The nearest competition was a Texaco pumping their gas at $0.25 per gallon. I couldn't imagine paying $0.25 per gallon when I could get it for $0.18 per gallon. Also, within the neighborhood, there were very few retail gasoline outlets, this yield the gasoline price low because of the abundant supply verses the demand.

Today, the demand for gasoline has increased, creating the need for gas stations on every major street corner. In the early 70's the demand was not as high. The gasoline supply was high relative to the demand. However, in the late 70's we entered into the era of the 'oil shortage' causing the gasoline price to escalate. (In hindsight we now know there was no real oil shortage, it was based on cutting the supply thus the affect was increased gasoline prices.) Gradually, as our demands for gasoline increased, more gas stations came into the marketplace. Unfortunately, most of the gas stations were owned by the same corporations taking away the competition and allowing for the reason why are gasoline prices so high. Simply, large demand with little competition.

China, only one country within the global marketplace, has increased their oil supply by 30% in 2003. Other economically growing countries increased their demand too. Over all, the demand for oil worldwide has increased, thus, increasing the gasoline price on a world market level.

Non U.S. exporters of gasoline have more options of localities to sell their refined gasoline. Another good reason why are gasoline prices so high is because of the strict gasoline regulations of the U.S. The refined gasoline must meet specific emission standards. It's costly for a refinery to meet the required standards. An exporter can then sell their refined gasoline to countries that do not require high regulatory standards. It yields more profit to their bottom-line. Consequently, here at home in the U.S., with less gasoline imports our supply is limited, thus, creating a higher gasoline price.

Regulatory compliance is another cost that is passed on to the consumer, explaining why are gasoline prices so high. Because emission standards are increasing, it becomes more and more costly for refineries to upgrade their equipment to meet the new regulations. California, for example, had a major disruption of gasoline when refiners shut down to retrofit new equipment. Consequently, the gasoline price increased.

Location...Location...Location... Typically the gasoline price fluctuates between regions and neighborhoods within the United States. Why? Much has to do with the location of the refineries. Most of the gasoline refineries are located in the southeastern United States. The distance between the refinery and the gasoline retail outlet will yield a cost differential as well. The less transportation involved in moving the gasoline, the less cost at the pump, in theory. (There are other cost factors involved, including "zone pricing", continue reading.)

The distribution of gasoline increases to the added cost of the gasoline. As trucking operating expenses increase, we, the consumer, feel it at the pump with the increased gasoline price. The trucking industry has had increases in insurance fees, taxes; vehicle maintenance costs, just mentioning a few and adding to the why are gasoline prices so high.

The gasoline price should be lower if there's less transportation involved. However, this is not always the case. Oil companies use a secret formula to calculate the wholesale price for gasoline. They take into account the location of the retail outlet, where the competition is, how much wealth is in a neighborhood, and the simple willingness of people to pay the price. This calculation is known as "zone pricing". A major reason why are gasoline prices so high from location to location "zone pricing".

Here in the Northwest, there are four major refineries that serve western Washington and parts of western Oregon. East of the Cascade Mountains in Eastern Washington, independent distributors receive their gasoline product from the Montana-Utah pipeline to supply retail outlets. The gasoline price is typically cheaper in eastern Washington for three reasons: the demand is lower (less population), supplies are plentiful to meet the current demand and independent distributors are attempting to make inroads into the marketplace; therefore, they are more competitive than the larger oil distribution companies.Pricing is also based on competition. The recent oil company mergers have reduced competition greatly. In 1981, the Northwest had seven oil companies that controlled 72% of the gasoline retail market. Independent oil companies controlled the remaining 28%. As the independents struggled for a market share, by 1998 four oil companies controlled 94% of the gasoline retail market along the west coast of Washington and Oregon. Without the influx of competition the price of gasoline can increase, thus further explaining why are gasoline prices so high.

The demand for gasoline typically increases during the summer months. The demand is higher; people are out and about, on vacations or short trips. It's highly unlikely that we'll stop enjoying life and not purchase the needed gasoline to run our vehicles. As long as we do, the price will increase. Why are gasoline prices so high??? Because we are willing to pay the price to accommodate our freedoms.

Essentially, we have few options for energy sources. Nearly all of the vehicles that we drive today require gasoline or some type of oil-related energy product like diesel fuel. It's a great challenge for the consumer to find an alternate source of energy; therefore, all we can do is pay the required price for the gasoline. Food, on the other-hand, is easy to find a substitute for. If, for example, the price of oranges increase we can buy apples or some other fruit as a substitute. With energy, we have little to no choice but to purchase the gasoline at the going rate. With few options, this really explains why are gasoline prices so high. We, the consumer, ultimately have no choice.

Taxes also influence the price we pay for gasoline. In the State of Washington we pay $0.28 per gallon for taxes. The average tax throughout the U.S. is about $0.24 per gallon. The taxes are relatively small compared to the over-all cost of the gasoline at the pump; however, every penny adds up and taxes continually increase explaining why are gasoline prices so high.

Answer 3

Speculation and fear seem to be driving prices up. Knowing that oil is a necessity for so many millions of people, investors afraid of losing their wealth in other commodities are increasing their demand for oil stocks, which drives the price up.