Fluctuation in Gas Prices

Despite fluctuations in crude oil prices, gasoline prices have remained relatively steady in the United States. Gas prices do not seem to be decreasing, rather they seem to be steadily increasing, regardless of the variations of crude barrels of oil. Why is this so, and what is the dominant factor that acts as a contributor to the problem, so that the United States government can attempt to remedy the concerns consumers express regarding the prices they pay at the pump and for heating oil during the winter?

Over the course of the year 2005, consumers have been paying more for gas at the local pump, and as a utility than ever before. This fact acts as a drain upon the United States economy, the world economy, and means consumers in a cash-strapped world have less income to use to buy other consumer goods. It is also economically empowering for such organizations as OPEC, which possess foreign policy interests often counter to that of the United States as a nation.

The possible core or base of problem of the rise in gas prices may lie not only domestically, but also in the patterns world wide industrial growth, especially the industrial growth and use of cars in China and India. This has put pressure on the refining capacity of the world as a whole and reduced the pressure on OPEC to lower prices in the long-term, even if prices may fluctuate slightly in the short-term in the United States. Recent statements from officials of the Organization of the Petroleum Exporting Countries have given little hope of seeing lowered gas prices any time soon. “In a recent interview, OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is Kuwait’s energy minister, said that he believed that the organization’s current output of crude oil is adequate to meet the demands the world’s consumers,” in a fair fashion. (Lemaster, 2005)

But even if OPEC were to increase its output, or if the United States opened certain areas for oil prospecting, such as Alaska, there would still be a limiting factor is placed upon the price of oil because of developing nation’s refining capacities. This keeps prices all for all users of oil high at present, given the overall escalation of users in total and insulates the price of gas and oil from subtle increases and decreases upon the part of individual suppliers. (Halcomb, 2005)

However, other possible causes may be simple hysteria and gouging. Historically, even when there has been a wholesale price of gas of $1.45 a gallon, gas stations have been able to make a profit by using the media frenzy to gouge customers, sell it for as much as $2.15.

A third factor may be simple unwillingness upon the part of customers in the United States, in the developing world, and in other nations that depend on crude to limit their use of oil, regardless of gasoline prices. “The people who are honest are going to pay for their gas no matter what the price is,” said one gas station owner. (Lemaster, 2005)

Data Gathering

Which policy should the United States pursue to lower the cost of oil? Should it pressure OPEC? Should it pressure the developing world to use less fossil fuels and gas? Should it develop hybrid cars and offer incentives to consumers to use them rather than gas-consuming SUVs?

To determine the cause, the U.S. must measure the price of gas in relation to OPEC production and world use. What factor affects pricing more, OPEC, the use of developing nations, American consumer demand, or world demand in relation to supply in total?

Works Cited

Halcomb, Ron. (2005) “Gas Prices to Remain High.” Retrieved from Auto Blog on 23 Jul 2005 at http://www.autoblog.com/entry/1234000953044926/

Lemaster, Jeff. (6 Apr 2005) ” Filling the Tank Takes More from Traveler’s Wallets.” The Jacksonville Patriot. Retrieved from newspaper website on 23 Jul 2005 at http://www.jacksonvillepatriot.com/Pages/04-06-05/Filling%20the%20tank%20takes%20more%20from.htm