The Reason for High Gas Prices

Topics: Petroleum, Automobile, Alternative fuel Pages: 6 (2452 words) Published: April 28, 2006
One night, I was surfing the internet when I came across a picture showing a gas station with the gas prices on a sign sitting in front of it. The gas sign said that the price for regular was "an arm", the price for plus was "a leg" and the price for premium was a "first born". As I marveled over what Photoshop can do, I began to think about these high gas prices and what is causing them. Everyone talks about, complains about, and jokes about the high gas prices, but no one does anything about them. Many people told me what they thought was causing the high gas prices, but I was always wondering what really is causing them. Is it corporate greed or is it supply and demand? It is actually a combination of both corporate greed and supply and demand; the solution to the high gas prices is to break away from using fossil fuels by supporting alternative fueled cars. High gas prices are a major problem because of the effect it has on the economy. A recent article in Business News states, "If prices were to remain at these higher levels by the summer driving season, it would mean Americans would spend $5 billion more a month than they did last summer on gasoline. Economists say this will reduce economic activity as Americans will have less money to buy ice cream or go to the movies" (Energy Information). Right now our economy is not doing well and these gas prices are hurting it even more. Think of all that money Americans would spend else where if they didn't have to spend it at the pump. Mark Zandi, chief economist at Economy.com, confirms this by saying, "Consumers are now responding differently this year than they did last year when prices were high. They are fundamentally changing their spending. I think we'll begin to see the effects on spending in the second quarter" (Energy Information). Why has there been a sudden increase in gas prices? I was wondering about that myself and it appears to be because the world is demanding more gas then it ever has before. According to a recent article in Time magazine, "China and India, the world's two largest countries are experiencing blazing economic growth, fueling a booming thirst for oil. The rest of the world's appetite for oil hasn't diminished" ("Why Gas Won't"). An economist for Economy.com conferat this by stating, "The problem is there is still a continued growth in demand as we have a growing population and an increase in the number of autos driven" (Energy Information). China and India are taking in more then they ever have before which is causing the supply and demand to go up. In the past it was easy to get oil, but as the demand for oil goes up, so does the supply. There is only so much oil in the world and it is becoming harder to find oil which is causing there to be a lower supply of oil. The war in Iraq is also causing the price of gasoline to rise. The tanks and airplanes take a lot of gas to run and, therefore, cause the supply and demand to rise. Another effect that the war is causing is a major spike in the sale of Hummers. In Automotive News, G.M. Product Manager Tom Bowlin stated, "In the week after the first missile attack on Iraq on March 19, the dealership sold 32 H2 trucks. Normally the dealership sells 70 a month" (Truett). G.M. states that the Hummer gets 10 to 13 mpg which is very fuel inefficient (Hummer). The Hummer takes an outstanding amount of gas to run, therefore rising the supply and demand. Some people think that opening more land for oil would help lower the supply and demand for gas which would lower the price of gas. Brian Simpson of Capitalism Magazine writes, "Environmental regulation significantly restricts drilling for oil in Alaska and on the continental shelf. More drilling could considerably increase the gasoline supply (up to 20% from greater Alaskan drilling alone) and thus lower prices" (Simpson). Environmentalists have gotten laws to be passed which makes it hard to drill for oil which...

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