Going
to the gas station ranks only slightly above going to the Dentist on the
list of things that you have to do but never enjoy, and to add insult to
injury, prices are going up yet again.
We raced to the bottom of the barrel to find some answers so that
next time you are at the pump, you know why a few countries, and a
change in season, mean less cash in the wallet.
First,
it is important to understand that whenever you see an increase in the
price of something, one of three things probably happened – either the
demand went up, the supply went down, or in the case of gasoline, both.
To a certain extent,
the current increase in gas prices is sad to say, normal.
Every year as summer approaches and more people start to break
out of hibernation, the demand for gas increases, prices rise, and your
wallet suffers. If we could
substitute other fuels to run our cars, we would switch to the cheaper
alternative, but without an effective substitute, we either pay or stay
at home. The refineries
that turn crude oil into gasoline exacerbate the supply situation by
performing routine maintenance during the start of the peak demand
period, and as the supply of refined petroleum drops, the price rises.
|
Where
do we get it?
1.
Canada
2.
Saudi Arabia*
3.
Mexico
4.
Venezuela*
5.
Nigeria*
6.
Iraq*
7.
United Kingdom
8.
Norway
9.
Angola
10.
Algeria
* OPEC Members |
This
year though, prices are particularly high because of several shocks
occurring outside our borders that have threatened the world supply of
oil. The most notable shock
is the threat of a war with Iraq. If
war were to ensue, it would likely cause a temporary halt to Iraqi oil
exports, and as the supply drops, you pay more at the pump.
In addition, a strike in the oil industry in Venezuela and
general political instability in that country has caused concern in the
market. Both Venezuela and
Iraq are members of the Organization of Petroleum Exporting Countries
(OPEC), and with two of the eleven member nations facing uncertainty,
you face higher prices because the markets fear there might be a
decrease in future oil supplies. The
U.S. Government protects against an extreme oil shock by maintaining a
Strategic Petroleum Reserve (SPR), but just like the spare tire in the
trunk of your car, it is for emergencies only.
So
especially for those of you unlucky enough to live far from the Gulf
Coast (yet another factor in higher prices), the international and
domestic outlook seems to be converging on a high demand, low supply
situation, which means you might as well get used to the idea of walking
whenever possible.
For
more information visit the Department of Energy online at www.energy.gov
and be sure to keep them in mind for internships in college.
