speech on why is the gas so high?
a good long specch
- 1 decade agoFavorite Answer
April 2008, the national average gallon of gas rose 15%, from $3.09 to $3.50. This was primarily driven by a 25% increase in crude oil prices.
Crude oil accounts for 55% of the price of gasoline, while distribution and taxes influence the remaining 45%. Usually, distribution and taxes are stable, so that the daily change in the price of gasoline accurately reflects oil price fluctuations. Occasionally, however, distribution lines are disrupted or are down for maintenance, which can increase the price of gasoline even when oil prices are down.
What Has Caused Recent High Oil Prices?:
According to most news sources, high oil prices are a result of surging demand from China and India, and a curtailment of oil supply from Nigeria and Iraq. Since oil is denominated in dollars, the 40% decline in the dollar in the last six years has also put upward pressure on oil prices. (Source: BBC, Oil Price May Hit $200 a Barrel, May 7, 2008)
What Is the Biggest Factor in High Oil Prices?:
Like most of the things you buy, oil prices are affected by supply and demand. However, oil prices are also affected by oil price futures, which are traded on the commodities futures exchange. These prices fluctuate daily, depending on what investors think the price of oil will be in the future.
Lately, commodities traders have been driving up the price of oil, even though supply has increased and demand has fallen. The EIA pins part of the blame on volatility in Venezuela and Nigeria. It also cites an increased flow of investment money into commodities markets. In other words, money that used to be invested in real estate or the global stock markets is now being invested in oil futures. (Source: EIA Short-Term Energy Outlook)
Will High Gas Prices Ever Go Down?:
The EIA forecasts that the national average price of gasoline will rise from $3.50 per gallon as of April 2008 to $3.66 per gallon through the summer. That's because the summertime vacation driving season usually increase gas prices by ten cents per gallon. This price hike is despite the increased use of ethanol, no planned refinery outages, and the return of BP's Texas refinery to full capacity. Gasoline prices are forecasted to return to an annual average of $3.44 per gallon in 2009. (Source: EIA, Insights Into Spring 2008 Gas Prices; Short-Term Energy Outlook, May 2008)
What Can We Do About High Gas Prices?:
The most immediate thing we can do is reduce our usage of gas, either through driving less or increasing fuel efficiency. Surprisingly, the best way to increase fuel efficiency is to keep tires inflated. These, and other suggestions, are included in the "Related Reading" section of this article.
Longer term, we can change our need for oil and gas by switching to alternative fuel vehicles, using public transit and moving closer to work to reduce commuting time. This will reduce the impact of gas prices on each of use individually by reducing use.
Could this reduction in itself reduce gas prices? It could, if it could reduce demand for oil enough to lower oil prices. It would have to happen on a sustained basis over a long period of time. That's because gasoline accounts for only 20% of each barrel of oil. Oil companies would still profit from the non-gasoline parts of their business. Therefore, even if consumers could conceivably stop 100% of gasoline use, oil prices might only decline 20%.
Furthermore, other pressures on the price of oil, such as dollar decline and commodities traders, would not be impacted by a gasoline boycott.
Could a gasoline boycott force gas prices down even if oil prices stayed high? Probably not by much. That's because the other elements of gas prices would take a long time to change. Taxes, which comprise 19% of gas prices, would require legislative approval, which could take months. Refinery costs (also 19%) couldn't be lowered, and neither could distribution costs (9%), both of which are fixed. (Source: EIA, A Primer on Gas Prices)
A boycott of one brand of gas could actually increase prices, since there would be fewer gas outlets. Those companies that were boycotted would simply sell their gas to those that weren't boycotted, defeating the purpose.
The only real way to lower gas prices is to lower demand for gas and oil over a long period of time. This would work, since the U.S. consumes 25% of the world's oil. This has increased over the last 20 years, from 15 million barrels per day (bpd) to 20.7 million bpd. A concerted effort might convince commodities traders, who have driven up oil prices 25% in the first quarter of 2008, that oil was a bad investment, thus allowing oil prices to return to pre-bubble levels.
Gas prices are mainly high because the price of oil is high. There's a lot of talk about price gouging, and prices go up fast and come down slowly. There's a little truth to that, but it's not the main event.
Oil prices are high because World demand is up and World supply is not. OPEC is almost topped out, and holding back a bit. China and India are growing fast. Iraq oil is still down a bit, and should have gone up. The main drivers here are
(1) OPEC has not expanded capacity much since 1979.
(2) Non-OPEC is nearing it's long-term production peak (we're running out).
(2) China is booming.
There is one other unseen factor that's the biggest of them all. When OPEC cracked in early 1986, conservative and liberal both argued to put a tariff on foreign oil to keep the price up and keep conservation going. Reagan and Bush senior blocked this. Bush senior because of oil ties, and Reagan because he didn't get it. The Republican Congress proposed it in 1986, and he slapped it down.
- barrantLv 43 years ago
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- Anonymous1 decade ago