Alighieri
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There are many reasons. First is the decline in the value of the American dollar, but just as important are decreased production in Venezuela, Indonesia, Iraq, and Nigeria (mostly due to civil problems), the increased demand for oil in the United States and well as increased demand in China and other countries, investor speculation on Wall Street, and finally the closing of many small refineries in the United States in the 90s (due to stricter environmental standards) has caused a drop in the US production of oil.
In the end, it boils down to the law of supply and demand. When there is more demand than supply, prices go up. |
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Judge Smails
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The weakening dollar combined with India and China's growing thirst for energy are killing us at the pumps. |
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WALTER F
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only greed by the oil company's that ow er soldiers are dieing for, |
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Dave87gn
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right now, the dropping dollar. Oil is traded in dollars, and since our economy sucks and our debt is nearing 10 trillion dollars, the value of our currency drops, so the oil producers need more dollars, cause they're worth less |
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Warren W- a Mormon engineer
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Actually, speaking as a true conservative, George Bush and his willing lapdog Congress, have been printing US dollars like they were toilet paper, so the value of the currency has been flushed. Too many dollars chasing too few goods and services cause the value of the dollar to go down.
Quit printing money, and watch oil and food stabilize, usually, as long as the government stays out of it. But they won't. Just like food going up for multiple reasons, not the least being that the government has diverted food to the biofuel debacle.
When the government messes with the free market it won't work right any more...
Ron Paul understands it well! |
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quantumrift
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It's Economics 101. Supply and demand.
China and India have economies now that have taken off and are hot. China is pretty much the world's factory now (if you do not believe that, look at everything in your home and at Wal Mart next time you go there). That takes energy. And that means oil. China now consumes more oil than the United States, and China does not have oil reserves. So where does China (and India, etc) get it's oil? They buy it on the world market (from OPEC and other oil producing countries).
OPEC and other countries are producing oil at a fixed rate, and demand continues to increase, so in order to buy oil, if you are a buyer, you have to bid a higher price for the oil per barrel.
That is for the crude oil.
Now as to gasoline:
We have a fixed refining capacity in this country due to the fact that no new refineries have been built here in over 20 years! So you can only refine so much oil into gasoline. The break out of refined products from one barrel (42 gallons) of crude oil are:
Gasoline - 51.4%
Fuel Oil - 15.3%
Jet Fuel - 12.3%.
and the remainder is lubricating oil, etc
So one barrel of crude can yield about 22 gallons of gasoline.
That is fixed.
The issue is that while our refining capacity is maxed out to make gasoline (they refineries switch a couple of times a year to refine home heating oil, diesel fuel and gasoline - they typically produce home heating oil in the summer months and gasoline in the winter months), the demand to gasoline and diesel fuel continues to increase!
Again, with a fixed amount of something, and you increase demand, the price has no place to go but UP.
Also, the government mandated the production of Ultra Low Sulfur diesel fuel, so that increases refining costs, and the cost of the finished product.
Our refineries are operating at capacity. However, refinery problems or things like Katrina can take a refinery down and put a crunch on the supply. Maintenance, explosions, hurricane etc can drive up prices.
Many of those supertankers you see coming in also have refined gasoline in them.
Also, any unrest or world event can make buyer skittish and they will drive up prices at auction just to be sure they get the oil for their companies. Iran rattles it's saber at Israel and it 'drives up prices' on the spot market.
So the issue is that we (the US) could have all the oil reserves in the world, but unless you have the refining capacity, it can't get to market.
The ONLY way to 'drive' prices down is to do less driving and have less demand. We are going into summer now in the US and that is typically the season where the demand is highest, yet we only have so much gasoline to go around. Supply and demand, supply and demand.
Combine that with the weak dollar and prices go up. ALso, I believe that the major oil producers now demand to be paid in Eurodollars, not US dollars..... |
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