Why is gas so expensive?

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In the surveys that were conducted in mid-2011, it was observed that the prices of gasoline have been increasing in a period of a few months and reached the all-time price of $4.11 per gallon in the year 2008. But, oil was found to be at 24 % lower price than the prices in the year 2008 that were all-time high. The oil supplies increased from the oil sources from Rocky Mountain States and the oil sands from Canada.

There was a disturbance created by Iran threatening the world by stopping the oil exports from the Persian Gulf. That had some impact on the rise in oil prices which in turn made gas expensive. The high prices of the crude oil can be the cause for the high prices of the gasoline. It was estimated that about 55 percent of the price of gasoline is contributed by the crude oil price. The taxes and distribution of the gas affect the remaining 45 percent of the gas price. It is thought that the military activities of US and Israel against the Iran might have had impact on the oil prices. The oil refineries were observed to be ceasing their functioning as per the EIA report and hence the prices might have gone high. The oil prices also go high during spring as the driving at the time of summer vacation is increased and so the gas prices also are elevated.

The gas prices go high due to the commodity traders. The gas also becomes expensive when there is extensive demand in India and China or if the oil supply is cut for some reason. The oil prices are considered to be influenced at large by the commodity traders who deal with the future contracts on the exchange of commodities. The traders have the method of bidding for future rates and it might generate an asset bubble. This difference is generally made to be filled up by the people by paying more for the oil and gas. The traders generally predict the future prices and if it appears for them that the gas prices can go high, they will tend to bid for still more. This might show drastic impact on the people purchasing it. Reduction in the dollar value also can affect the gas prices.

Author: Hari M

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