Gas For Less Money

Why are gas prices so high now, nearly double what they were 18 months ago with no slow-down in sight?

There are many people who believe the rise in gas prices are the results of oil speculators, or greedy oil company executives. That is not the case.

In order to understand the rising prices, it’s necessary to look at what goes into the price per gallon we pay at the pump. (NOTE: See “Why Are Gas Prices So High?”)

Less than 15% of the per-gallon cost is due to marketing and profits. While speculators may have some effect on the market, they are not responsible for the current record prices. And oil compay profits are a result of the price, not the cause.

The main reason why gas prices are so high is that demand has grown faster than supply. With China and India entering new phases of industrialization, their thirst for oil has skyrocketed. This is one of the primary contributing factors.

In addition, the instability in the middle East has interfered with supply. This is another big factor.

Finally, current refinery capacity can not meet demand. Refineries have been operating near-capacity, and there are no new refineries being built.

The answer, then, is that demand is growing too fast for current supply and refining capacity. For these reasons, gas prices will continue to climb for the foreseeable future.

Instead of asking the question Why are gas prices so high, we should be looking for ways to mitigate the sting through gas mileage improvements, Hypermiling techniques, gas saving and gas mileage devices, etc. We may not be able to effect the high price of gas, but instead look for ways to improve gas mileage.