Answer to gas prices?

Can someone please explain to me

the reason behind the high gas prices

Gas prices keep increasing by the number

and oil companys are making more and more off of it

if it is our own people controlling it

why hasnt the goverment stopped them

8 Answers

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  • 1 decade ago
    Favorite Answer

    OK. Here's where everyone complains and says governments are in league with the oil companies and calls them satan incarnate. Let me explain the REAL reason behind this...it's called Supply & Demand Economics

    Oil is a commodity, just like gold, orange juice, wheat, and cotton. The prices of commodities are determined by how much of it people want and what they are willing to pay for it (sort of like an auction). When there is a reason that brokers and the people they represent believe that there will be a shortage or high demand for a commodity, they buy as much of it as they can to try and make the most profit. If there isn't much demand, then the products they make with these commodities have to be sold cheaper and the brokers and their customers lose money. So the oil companies just put the oil they pump out onto the market and how much it makes is determined by buyers. And the hysteria about oil has been sending the cost of a barrel of oil thru the roof. That is why oil suppliers are making record profits.

    Now onto profit. Companies work on Margins of Profit. Minimum margins are determined by a companies overhead. The more they have to spend making a product, the more of a markup they must put on a particular product. Overhead are things that have no direct bearing on a product being made such as Salaries, Electricity, Property Rental, Phone Bills, Trash Collection, etc. This is why you can buy things cheaper online than from retail stores. In the case of fuels, the margin percentage has remained the same, but when it costs more to buy supplies for making something (oil for fuel) then by contrast, the price of the end product goes up. If something costs $1 to make and you sell it at 10% profit, then you receive $1.10 for your $1 investment. Now if it costs $2 to make, the same 10% profit makes it cost $1.20 and you have made 20 cents instead of 10. That is the reason that refineries are making record profits.

    The government hasn't stepped in to stop them because that would mean stopping global economy. US Oil companies are just a small number of companies involved in the oil and gas market, but they are far and large the most restricted. It is estimated that 1/2 the cost of a new industrial undertaking (refinery, power plant, etc) is used in legal fees by the massive number of groups filing lawsuits to stop a project and one 'environmental impact study' after another. Do you know that there has not been a new refinery opened in America since the 80's nor have there been any improvements to existing ones to more efficient ways of making fuels.

    Here is the solution and it will take 3-5 years to accomplish: Allow the refineries to expand, update and build. Do one impact study-period! Have the courts give a date that ALL opposition must submit their filings by and cut it off at that date. Allow the lawyers to argue against them en masse. Once projects are approved, fast track em. Give the builders tax BREAKS as an incentive to get these factories up and online.

    Only when the supply amount of fuel is increased to the US will prices come down dramatically. Fuel companies would much rather sell a million gallons of gas at $2 a gallon than 200,000 gallons at $4.

    The ONLY controls that the govt can legally have is the amount of taxes applied to each gallon. Federal taxes on Gas are 18.4 cents per gallon, here in Maryland 41.9 cents is added per gallon. That's over 60 cents per gallon! California adds 63.9 cents per gallon; that's 82.3 cents per gallon in taxes.

    Here is a breakdown on a gallon of gas from California on May 5th, 2008. Cost of gas: 3.90. Cost of oil to refinery 2.86 Oil production profit 0.13 Refinery profit 0.24 State Underground storage fee 0.01 State & Local Sales Tax 0.29 State excise tax 0.18 Federal excise tax 0.18. There are the numbers. The oil pumpers made 13 cents, the refiners made 24 cents, the federal gov't made 18 cents and Cali taxes collected 48 cents...TWICE as much as anyone else!

  • Anonymous
    1 decade ago

    Gas companies may be distributing the gasoline, but they can't control the price of the raw material - oil. The price of oil itself is partly controlled by supply and demand, and is high because of fear / negativity around oil supply right now (due to problems in Iraq, Iran & general mid-east instability). Also, the OPEC cartel is partly responsible for maintaining high prices.

    I'm not saying the gas companies aren't profiteering - because they certainly are. But they haven't been stopped, for the same reason that microsoft is allowed to make billions for pumping out a bunch of CDs. Thats the spirit of free enterprise. Unless it can be proved that they are behaving in particularly harmful ways, monopolies & oligopolies usually aren't interfered with directly.

    Also, the cynical people among us might ask whether the senior government officials have stock or business interests with oil firms. Perhaps the people in government are profiteering themselves, a la haliburton?

    But as the other answer suggests, high gas prices are a pain but they aren't the end of the world - despite the doom and gloom. Gas prices (in real, inflation adjusted terms) were exceptionally high in the 70s, but life went on: people moaned, and then bought more fuel efficient cars. Today, I'm sure people will come to adjust by looking to public transport (and for their local governments to provide decent systems), and to start getting into alternative fuels, like biofuels or other renewables.

    It won't happen tomorrow but it could be the stimulus for a better world.

  • Anonymous
    1 decade ago

    Because the government is one of the causes. One of the reason the prices are so high is the demand for crude oil. For nearly a quarter century we here in the United States have been prohibited by our own government from exploring for new sources of the stuff. We also haven't built any new oil refining facilities since the 1970's. Look for things to remain the same until we do.

  • Anonymous
    1 decade ago

    I do not wish to get into the political reason behind the high prices,but think about it. A rich Texan in the White House that is involved in big oil. Alas, we do not have a viable alternative for November elections. Until we get a president that doesn't have "big oil" companies supporting him, we won't see lower prices. Lobbyist for these oil companies also keep our congress and senate plied with money and favors. In short, don't hold your breath for lower gas prices. I'm afraid we will never again see prices under $3.

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  • 1 decade ago

    Maybe government and oil companies are evil, greedy people. Or maybe you should see the silver lining to these high gas prices and find ways to live without being so dependent on oil. The prices will keep rising until we stop buying gas. Step out of your comfort zone and stick it to the oil companies.

  • Anonymous
    1 decade ago

    The oil companies make .08 ( eight cents ) per gallon.

    Government taxes are about .16 ( sixteen cents ) per gallon ( the taxes vary from state to state )

    At least we can still get gasoline, after Obama gets done penalizing the big oil companies ( like Carter did ) we will have fuel shortages and long lines ( like when Carter was President ).

  • 1 decade ago

    Democrats does not believe in drilling for oil inside USA, that is the major problem. Until we address the supply side of the equation, we are at the mercy of OPEC especially now that the non OPEC world is losing its ability to raise oil output.

  • 1 decade ago

    Our government wont change it because they are profiting from it.

    they are exempt from paying those insane prices, just like they dont have to renew registrations or licenses.

    The investors are the ones who set the prices...the oil companies merely benefit from the investor's pricing wars.

    Source(s): read it on cnn.com and my step dad is an investor (jerk)
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