Why Gasoline Prices Are So High

high cost of energy

In today’s global climate, the high cost of energy is a reality that we all have to deal with. In reality this has become a double-edged sword, as lower oil and gas prices come at the cost of higher inflation. This in turn has had a direct impact on the cost of doing business and making purchases as businesses and individuals cannot reasonably keep up with the rising costs of energy production. In fact, in many cases, these high costs have actually forced some industries, such as the mining industry, to shut their doors altogether. However, while these are the direct consequences of high energy costs, what many do not realize is that they are also a result of indirect and often unintended consequences as well.

When gas prices rise, this can be a direct drag on the national economy affecting everything from household spending to the cost of airline fares to the lease practices of individual companies. For example, if oil companies decide to raise the price on their oil, they may no longer be able to attract the labor and capital needed in some parts of the country and that capital could instead go towards other places that are less effected by the increasing cost of oil. Therefore, the company may choose to reduce the amount of rigs in the United States or in the world at large in order to balance their losses, or in the worst-case scenario close their rigs and leave those communities where they have been working for generations in the dark. While these situations are far from ideal, they are not examples of how high gas prices directly hurt the economy or how business decisions made in the name of higher commodity prices have a ripple effect across many aspects of the economy.

cost of oil and gas

There are several factors at work behind the rise in the cost of oil and gas. One of these factors is the fact that the United States is currently experiencing one of the largest oil drilling programs in the history of the planet. The Bush administration and the Canadian government have been working hard to support the North American economy by allowing the drilling to continue onshore and off. These countries now sit atop the world’s oil supplies and as prices continue to rise, the demand for oil will follow. This means that between a seven-year high and two-year low, we could be in for quite a ride until we find an end to the price spike.

Another factor in the rise in oil and gas prices is the simple issue of supply and demand. As the Asian economies grow, it is likely that demand for oil will increase, causing oil prices to rise. In addition, as the Middle East gets richer, the demand for oil will likely rise as well. All of this means that while high gas prices may hurt the wallet now, the global economic downturn will likely mean fewer job openings, higher inflation, and eventually higher unemployment rates. In the long run, high gas prices will hurt the American economy more than any of the individual cases outlined above.

save money

High gas prices also have an indirect effect on discretionary spending. If you are in the habit of traveling on weekends, you know how much money your car maintenance bill costs each week. If you are trying to save money, you might consider taking a course on how to increase your fuel efficiency. While it may not seem like much in the short term, you will find that the small increase in gasoline per gallon that you pay can make a big difference in how much you travel each weekend.

The last major factor in the rise in gas prices is the general trend of increasing cost of service. When oil prices begin to climb, pumps are usually slower at filling a gallon than they are today. Even if you fill a tank normally, you may find that the pump takes longer to refill, which results in high gas prices for you. The solution to slow down the rate of filling your tank is to get a tankless pump, which have a constant flow of propane but no heating element, so that you do not need to wait for the pump to heat up.

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