Why Are Gas Prices So High? Energy Market Manipulation and Oil Prices (2008)

• published: 04 Oct 2013
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The usage and pricing of gasoline (or petrol) results from factors such as crude oil prices, processing and distribution costs, local demand, the strength of local currencies, local taxation, and the availability of local sources of gasoline (supply). Since fuels are traded worldwide, the trade prices are similar. The price paid by consumers largely reflects national pricing policy. Some regions, such as Europe and Japan, impose high taxes on gasoline (petrol); others, such as Saudi Arabia and Venezuela, subsidize the cost. Western countries have among the highest usage rates per person. The largest consumer is the United States, which used an average of 368 million US gallons (1.46 gigalitres) each day in 2011. US petroleum consumption reached an estimated 18.87 million barrels per day (3,000,000 m3/d) in 2011, and is expected to increase to 18.96 million barrels per day (3,014,000 m3/d) per day in 2012. Drivers in the United States traveled 500,000 miles (800,000 km) per day in 2011, and were expected to travel 8.158 billion miles (1.3129×1010 km) per day in 2012. This equates to an average of 33 miles (53 km) per vehicle per day. On average, US drivers consume 1.49 US gallons (5.6 L) of gasoline per day, or about 10.44 US gallons (39.5 L) per week.[2] As of March 2013, the average price for 87 octane gasoline was $3.22 a US gallon (85¢/L). This price represented a 28 percent increase over a period of just 2 months and a 52 percent increase since the end of January. Small businesses are starting to have to pay more for gasoline. Just a couple of weeks ago, oil reached an all-time high of $111 per barrel ($700/m3). According to AAA, the national average for a gallon of gasoline is now a record $3.33 (88¢/L). Small businesses are being impacted by these changes of rising gasoline prices. In 2008 a report by Cambridge Energy Research Associates stated that 2007 had been the year of peak gasoline usage in the United States, and that record energy prices would cause an "enduring shift" in energy consumption practices. According to the report, in April fuel consumption had been lower than a year before for the sixth straight month, suggesting 2008 would be the first year US usage declined in 17 years. The total annual distance driven in the US began declining in 2006. The average price per US gallon in 2012 (as of 31 December 2012) was $3.618 (96¢/L), the highest ever for a year. As of 31 December 2012, the average price of gasoline was $3.298/gal (87¢/L), with New York at $3.70/gal (98¢/L) for the highest in the US, and Colorado at $2.987/gal (79¢/L) for the lowest. Finished motor gasoline amounts to 44% of the total US consumption of petroleum products. This corresponds to 18.5 exajoules per year. As of 2012 the cost of crude oil accounted for 62% of the cost of a gallon of gasoline in the United State while refining accounted for just 12%. Taxes and distribution/marketing accounted for 12% and 14% respectively. After Hurricane Katrina and Hurricane Rita, gas prices started rising. They became record high levels. In terms of the aggregate economy, increases in crude oil prices significantly predict the growth of real gross domestic product (GDP), but increases in natural gas prices do not. All the damages from the hurricanes ran up gas prices. By 30 August, a day after Katrina's landfall, prices in the spot market, which typically include a premium above the wellhead price, had surged pass $11 per gigajoule ($12 per million British thermal units), and by 22 September 2005, the day before Rita's landfall, the spot price had risen to $14/GJ ($15 per million BTU). Crude oil is the greatest contributing factor when it comes to the price of gasoline. This includes the resources it takes for exploration, to remove it from the ground, and transport it. Between 2004 and 2008, there was an increase in fuel costs due in large part to a worldwide increase in demand for crude oil. Prices leapt from $35 to $140 per barrel (220 to 880 /m3), causing a corresponding increase in gas prices. On the supply side, OPEC (or the Organization of the Petroleum Exporting Countries) has a great deal to do with the price of gasoline, both in the United States and around the world. The speculation of oil commodities can also affect the gasoline market. Taxes are the next biggest contributor to gasoline prices at around 12%. In the United States, both state and federal taxes apply to gasoline. In addition other taxes may be placed on gas including applicable state sales taxes, gross receipts taxes, oil inspection fees, underground storage tank fees and other miscellaneous environmental fees. Distribution and marketing makes up the remaining 5%. The price of transporting crude oil to a refinery then gasoline to a point of distribution is passed on to the consumer. In addition the price to market the fuel brand is passed on. http://en.wikipedia.org/wiki/Gas_prices