Many people are up in arms over the gas prices, blaming everything from the President to greedy businessmen. However, the truth makes a lot more sense. Theres three main factors at play here
1: The Middle East: Uprisings and revolutions over the last 4 months have put pressure on many governments in northern Africa and Arabia that regulate the drilling and shipping of oil around Europe, Africa, and Asia, as well as much of the oil exported to the US. This tension has caused insecurity in the prospect of receiving oil, forcing a higher demand to claim oil contracts at lower prices, which in turn drives up the price. When a commodity is threatened, it costs more to secure the shipment of it.
2: Inflation: The value of the U.S. dollar is slowly falling in global markets. Seeing as much of the oil shipped around the world is traded on the U.S. dollar, when its value falls, it costs more for each barrel of oil, pushing prices up. With wages being outpaced by inflationary growth, people aren't going to be making enough money to catch up to price increases, placing pressure on our wallets every time we pull into the gas station.
3: Supply and Demand: more and more economists are becoming smart to the idea of Peak Oil: The idea, nay the fact, that world oil production is or will be peaking soon, and that after this peak, we will no longer be producing enough oil to keep up with its rise in demand. As oil becomes more and more scarce over the coming decades, it will be valued higher and higher, until its either unaffordable, or completely gone. While this factor is the least considered in day to day trading of oil, its certainly the most certain.
What can we do? Conserve. Drive less often when you don't need to. Walk to the store or to pick your kids up from school. If you have a car that gets less than 20mpg and is over 5 years old, consider upgrading to a newer, more fuel efficient car. The money you spend on increased efficiency can be saved over the long term when you will be thanking yourself for not having to stop so often for gas when the price reaches $4-5 per gallon. Also, try driving 55. Unless you are in a hurry to work and willing to burn the gas, you don't need to rush everywhere. Every increase of 5mph above 55 you drive can chop a mile or two per gallon off your fuel mileage. After all, the EPA mileage estimate for your car is measured at 55mph, so if you drive 65 in a car that is rated for 30mpg you can really only be getting 26mpg, and that can make quite a difference. If we work collectively to lower the demand for gasoline, we can bring the demand down in the markets and hopefully slow the rise of oil prices and not break the bank.
