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Buy custom Reasons for High Gas Prices essay

The significance of oil globally can never be underestimated. The world’s economy largely depends on this precious commodity as almost any activity requires this resource. Increase in oil prices has been a paramount concern over the last recessions. High prices for gas have caused shock, anger and frustration among the mankind (Hederman, 1980). The world’s economy largely depends on the so called “Black Gold”, which is also known as crude oil; without it the economies of most developed countries are most likely going to deteriorate. The high price for crude oil causes high price for gasoline. This accounted for 72% of the gasoline’s price as of February 2012. The remaining percentage is influenced by the distribution and the taxes. There are also several reasons leading to the rise in the gas prices.

Primarily, the main reason as to why the price of gas is so high is the upsetting proceedings in Iraq, Saudi Arabia and Venezuela. These are the countries that produce oil. Due to these upsets, there are some problems of getting oil for the international market. The reduction of the amount of oil produced by OPEC is also a significant factor which fuels the rise in oil prices (Hederman, 1980). This causes a decrease in supply even though the demand is significant. This phenomenon is termed business 101 – a demand and supply rule. The decrease in supply with the big demand leads to high prices. This is obvious with any commodity and can be clearly seen with the price of gasoline at the market.

Globally, there is high demand for oil. This is one of the core reasons why the gasoline prices have increased (Bezanson, 2006). In the US, there is a continuous rise in the economy with few malfunctions. At present, there is high increase in demand for gasolene, leading to increase in gas stations in most places. At the beginning of the 70’s the demand was lower. The supply was higher than the demand.  But later the issue of ‘oil shortage’ emerged, due to which the price for gasoline began to hike. In recall, we realize that oil shortage was not so severe, but it was due to the reduction of supply, which, in return, caused an increase in price of gasoline. Progressively, very many gas stations were built as the demand for oil increased. Unluckily, most of these enterprises were monopolies, thus reducing competition and causing the high prices. This was due to high demand with no competition.

On the other hand, China has enlarged its supply of oil to the global market by 30 per cent in 2003.  Demand for oil from other financially developing countries bacame bigger either.  Furthermore, the demand for petroleum has increased all over the world, leading to the rise in price of gasoline on the international market level.

The United States’ severe gasoline regulation is another reason leading to high gas prices (Bezanson, 2006). The advanced gasoline has to meet some specific emissions standards, which is rather costly. Therefore, non-US exporters provide rectified gasoline to countries whose regulatory standards are not so high. Thus, in the USA, the price for gasoline is high due to fewer imports.

In addition, the prices for gasoline are rather high due to the regulatory compliance passed to consumers. Factories spend more funds to advance their machinery to respond to these regulations due to the increase in the emission standards. For instance, California had a chief disturbance of gasoline after the refining facilities temporarily stopped production in order to modify their equipment. Subsequently, this led to increase in the price for gasolene.

Location is another key factor as to why the price for gasoline is high. For example, in the United States the prices are different in various places. The cost is also influenced by the remoteness of markets and refinery facilities. The high transportation cost involved in transportation results to high oil prices. Gasoline distribution adds up to its cost. The consumers feel extensive expenses due to the increase in price as the trucking operating cost grows. The trucking industries are forced to increase taxes, insurance fees, vehicle maintenance costs, and all these factors contribute to the growth of gasoline prices.

During the summer season, the demand reaches its highest peak. People are on vacation or engage in short trips, thus they need gasoline to travel effectively. It is out of question that people will refuse to have fun and stop filling their cars with gasoline (United States, 2003). As long as the gasoline is needed, the price will go up. This is because people are ready to provide themselves with comfort and quality recreation.

Basically, there are not many alternatives for power sources. Most vehicles today use gasoline or other sorts of similar products, such as diesel fuel. It is a monumental challenge to consumers to get the alternative sources of energy. Therefore, consumers are forced to pay the set prices for gasoline without hesitation. As there are no other alternatives, this increases gasoline prices.

The oil prices are set by the commodity traders who buy and sell futures on the commodities exchanges. The traders execute agreements to buy oil at a specific time and sell it in the future at a specific price (Conference Board of Canada, 2004). However, the oil prices are affected by the oil price futures. This price fluctuates daily, depending on the expectation of the investors on the oil price in the future. When they project higher prices, they double the amount and this causes the rise in price of gas.

The declining dollar is another reason as to why the price of gas is high. Oil is denominated in dollars; therefore, the 40 per cent decline in the last six years increases the pressure on oil prices.

In conclusion, since oil is the driving force in the majority of the economies globally, it is paramount reducing unnecessary usage of this resource. It is evident how the consequences of war drastically affect the majority of countries depending on oil imported from the war-torn countries. Peace is a fundamental factor all countries need to embrace and this will eliminate the implications of oil importation, thereby reducing the oil prices. The long-term solution can be shifting from our need for gas and oil to switching to other sources of fuel.

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