In your opinion, which factor best explains high gas prices?

Question

1) Supply and Demand
2) Lack of an adequate competition model
3) Government and State taxes
4) Oil company greed

Feel free to use more than one fo these factors if necessary, or add your own if you have a different take. Please give a brief explanation what facts you base your answer on.

The answer in my opinion is all 4.

Supply and Demand - This is the law which governs all products in a free market economy and should work to keep prices low, but doesn't in this case for a several reasons. Supply is artificially manipulated by groups like OPEC. Environmental groups also effect supply by retarding all new drilling and refining efforts.

Lack of an adaquate competition model - There is no competition in the gas market. Oil Companies engage in a practice I like to call price fixing by fiat. They do not have to be in cahoots. One retailer sets a price and all others follow suit will little regard to any actual supply or demand considerations. Since most of us must buy their product it eliminates the traditional cost lowering effects of provided by proper competition in the marketplace.

Federal and State Taxes - They are too high and Congress is trying to raise them by 50 cents a gallon again.

Oil Company greed - Exxon/Mobil 80 billion in profits in a quarter. C'mon now, even for the most ardent supporters of capitalism (of which I am one) this has to raise some eyebrows. If for no other reason than the fact that they don't even bother to try and make it look like they are competing with each other anymore.

Answer 1

It is absolutely a combination of all four of them.

1. The world's population is gradually increasing yet the world's oil supplies are finite and being drained each day. Therefore demand is increasing while the supply is decreasing. China and India, the two most populated countries in the world, are becoming more dependent on OPEC which drains from a supply America is dependent on. As their economies become stronger more of them will take to the roads in automobiles and that simply adds to the problem.

2. The world's oil supply is indeed control by a oligopoly; the Organization of Petroleum Exporting Countries. They can increase or decrease oil output thereby having an extremely adverse effect of the global economy and the price of gasoline itself. They also insure that the more expensive places to extract oil from is done first; leaving the cheaper places for last. This is why America has had such a strong relationship with the Saudi Arabian government because they've acted as some what of a swing state for us in the past, increasing output when other countries decrease it.

3. Government taxes on gas are done with the best of intentions; to try to make us cut back on its use, but indeed add to the problem. Many people are suffering financially at the pump and only drive to and from work.

4. Obviously all free market based companies are always looking for ways to cut costs, or increase prophets, or both. Major multi billion dollar companies like Exxon Mobile say that they need the money to begin to search for new oil sources, but these companies average eighty billion dollars prophet a quarter; come on!

Answer 2

There hasn't been a new oil refinery built in America since 1976 and with existing plants working close to capacity, even a minor outage in a plant can impact the price of oil.

A combination of tight environmental restrictions, not-in-my-back-yard community opposition, and the high cost of new construction has been an impediment to additional capacity.

A new refinery would cost about $3 billion and refining margins have traditionally been much tighter than on the crude production side.

Example:August 14, 2007

Oil giant BP's plan to expand its Whiting, Ind., refinery, just across the border from Chicago, is sparking a firestorm of opposition.

The expansion would allow BP to refine heavy Canadian crude oil, boosting gasoline production at the fourth largest refinery in the U.S. and reducing the nation's reliance on Middle Eastern oil.

Answer 3

I like your question! Many liberals will believe that it is 2 and 4 but I will have everyone ponder this statement since the oil companies make 8 cents on the dollar and state , local and Federal make about 30cents who has the most incentive to keep prices high? it is the same reason why gas is so high in Europe....... government taxes.

Answer 4

I once read an article by Andy Rooney that said that the gas prices are increased by "speculation" not by the actual cost of a barrel of oil. I don't know if it's true, but it seems pretty crazy that the price of oil can be so high just because someone thinks that the demand is up or down...... I think everyone is worried about it......

Answer 5

There are multiple factors causing our current gas prices.
1. Supply is definetely way up due to emerging countries.
2. Unlike most other products there is no generic or substitute
either you get gas or your car does not move.
3. Compared to most countries are taxation of gas is quite
low.
4. Oil companies are taking an ever larger profit on gas and
not improving pipelines or creating refineries to process
it faster so they can keep cost/prices high.
5. A real important one is the fact that the dollar is so weak
compared to foriegn currency. In the last 4 years the dollar
lost 25% of its value. That is the difference between
$2.75/gallon gas and $2.06/gallon gas.
/

Answer 6

Supply and Demand. It's very easy to blame someone else, but WE control the demand and as prices went up this summer, nobody cut back on their driving. Under the law of supply and demand, that means the price isn't high enough (can you believe, Al Gore is right about something).

Hey e.r., while there is no substitute, it is very easy to decrease consumption (combining trips, carpooling, driving at the speed limit, public transportation, more fuel efficient vehicles, less leisure driving, etc). Nobody seems to be doing any of these measure.

Answer 7

4. Definitely. How can you make record profits when prices go up that high? Do tell me supply and demand. That is saying people use more gas when prices go up a dollar a gallon. Not happening. Tourism is down dramatically. I live near 3 large lakes. In the summer they used to be full of boats. Not now. People are using less. Show me proof that they are not and I will believe. What happened to the gas wars between stations? It is oil company and distributor collusion and congress has voted against investigation and fines.
Damn, all the Exxon stock holders must be on here this morning.

Answer 8

Supply and Demand

Answer 9

I call it free market, free to do whatever you want as a corporation to get more profits with less expense. price fixing creating artificial scarcity, just downright lying that sorta thing. the oil cartels do just that and more. they work together because they know that if you do the profits come pouring in and what seems like competition, is not really.

RRRRR

Answer 10

#4 definately.I barely make minimum wage,and all i do is go to and from work(10 miles each way,i have a 4 cylinder engine)and i dont go on vacations,and at the most,i travel once a year,200 round trip miles to see my cousin,that's it.I TRY to not only go when it's absolutley necessary.I also believe those who have a 8 cylinder engine or a SUV,should pay more at the pump.