The Ups and Downs of Gas Prices

 Last weekend I went to the gas station to fuel up my truck so that I could make the hour drive from Athens Ohio to my home just east of Columbus Ohio. I arrived at the pump and put $20 into my tank without really noticing the price of gas. I knew this amount of gas has always been enough for the drive so I didn’t really think about the price of a gallon of gas. But as I began to drive away I looked down to see how much the gas needle had moved and to my dismay I saw that I had less than a quarter of a tank. I thought back to just a few years ago when I first started driving and how $20 would give me well over half a tank of gas. As I left the gas station I looked back to see that the price of a gallon of gas was $4.19. Still in shock I asked myself why gas prices had skyrocketed but I soon realized I knew nothing about why gas prices ever go up or down.

To understand why gas prices are such a mess these days you must first understand the history of the United States and its dependence on foreign oil. It all started in 1859 when the first oil well was drilled in western Pennsylvania. From there oil wells sprouted up around the rest of the country and even the world. In the early 1900’s the United States was producing much of its own oil. But with much of the known oil supply being drilled, there was a growing fear that the United States's oil supply was running low. So American oil companies started to look more globally for oil. By the 1970’s the United States got one third of its oil supply form the Middle East (mainly Saudi Arabia and Iran). This gave them a lot of control of the price of oil as they demonstrated with an oil embargo in the late 1970’s that caused the very first gas crises. Since then gas prices have been constantly going up and down with steady increase. But why? 

Image taken from www.trevorhoppe.com  

 Gas prices have been rising and falling for years now and it’s getting so bad that many Americans (including me) are starting to think it’s ridiculous. As you can see in the picture taken above, someone obviously thought the prices were so out of hand that numbers just didn't do it justice anymore. But Americans have been talking about how gas prices are out of hand when they’re high or how cheap gas is when it’s low. What does it all mean though?

Graph taken from www.vantagewire.com

The answer is very complicated and could have many reasons. One of these reasons could be that oil is bought and sold on a global market. This means that as the value of the dollar fluctuates based on other countries so does the value of a barrel of crude oil. So if the value of the dollar drops substantially on the global market for some reason, the price of oil will go up substantially. Above is a graph of the inverted value of the dollar (in green) compared to the price of a dollars worth of oil (in blue) from January 2008 to May 2009. You can clearly see that there is a major correlation between the two, as the value of the dollar increases and decreases so does the value of oil. While this is a clear indication that the global market affects the price of gas there are many other reasons that people use to blame this fluctuation.

One of these reasons is that there are people in the world who will buy and sell oil based on whether they think the price of it will go up or down to try and make a profit. These people are called speculators and many Americans, like President Barack Obama, blame them as the cause of gas prices. But speculators are no different than anyone taking a chance with buying stock in a company they hope to do well in and then selling it off for a profit. These speculators are usually just ordinary people trying to make some money. You can find all of the details about how this process works by clicking on (Gas Speculators) and reading.

Americans also blame the constant fluctuation of gas prices on other countries that are starting to become more developed. So many of the people living in those countries are starting to drive vehicles all the time. Countries like India and China are starting to consume nearly as much oil as the United States. This starts to become a problem when you have a limited oil supply and increasing drivers. As other countries start to buy more oil from the big oil companies around the world, oil is becoming less and less available to countries like the United States who are used to buying up as much oil as they want.

Another reason that gas prices could be so high is that the federal government has been taxing the oil companies to refine and transport the crude oil they get out of the ground. This could be due to the national debt that the United States is facing, so the government is trying to get some money back by taxing the things us Americans consume the most. Another factor is that the federal government has been slowing down and even stopping many oil refineries as you can see in more detail at (Blaming the U.S. government). Also, since the BP oil spill the federal government has not allowed deep sea drilling in the gulf which is where America gets a lot of its own oil. As you can see in this article from before BP oil spill that "US refiners provide 90 percent of the gasoline used in the United States and the remaining 10 percent is imported" (Honarvar 207). This means we will have to buy even more oil from foreign countries than we already do, which will increase the prices of gas as well. There are many reasons why gas prices are the way they are but whatever the reason, gas is still becoming a costly problem that is affecting the daily lives of most Americans.

All of these reasons seem like they have an impact on the price of gas, some more than others, but all of them none the less. The real factor to think about is how oil is created. Oil is made from dead organisms that have piled up together and end up buried deep within the earth where just the right amount of heat and pressure is needed to change the mineral composition of the organisms into oil. This means that since living organisms are only known to exist on our planet, the only place to find oil is trapped within the confines of our planet. No body knows exactly how long oil takes to be created but it is thought to take up to two million of years. This is a very slow process and I cant help but be concerned that the world is consuming much more oil than it could ever create. According to the U.S. Energy Information Administration the United States alone consumed 378 million gallons of gasoline per day in 2009. When I first noticed this statistic I had to do a double-take because I couldn’t believe how much oil gets consumed in only one day.

Image taken from www.eia.doe.gov

Oil is bought and sold on the global market in barrels. To put it in perspective, one barrel is approximately 42 gallons. The graph above shows the history of how many billions of barrels of oil were used each year from 1900 to 2000. As you can see in only 100 years the world went from using hardly any oil to consuming 25 billion barrels a year. The next part of the graph shows the expected future of the worlds oil consumption based on the same amount of increase that we see today. It shows that the worlds oil consumption will peek anywhere from 2026 to 2047 and will be vastly depleted by 2125. Looking at the graph I couldn't help but think about how I will still be alive when the supply of oil begins to run out. I had always just assumed that oil was a problem that my grandchildren or their children would have to deal with. But looking at this graph I started to realize that this is a real problem that needs addressed now and not by our grandchildren. But what can we do?

Image taken from utsa.edu

There are many things to do to help ease the pain of gas prices. One of the most obvious is to just drive less, don’t drive around just because you feel like it. Also, you could carpool with someone. Riding together would save you a lot of gas which in return saves you a lot of money. There are even organizations that you can find to help you locate people who you could potentially carpool with. You can find many more ways to save gas and money at (Gas saving tips). You could even go as far as to buy a hybrid car which uses two fuel sources instead of just gas. These will help you save gas but in the long run does it really help?

The truth is that the worlds supply of oil is going to run out. It is just a matter of time. As gas becomes less and less available to people the price is going to go up. Also, with the worlds population growing all the time we are having more and more people wanting to drive and consume gas. This makes the demand for it go up which will also make the price go up. As time goes on the price of oil will surly go up until it runs out completely. But what can we do?

We need to look for alternative solutions to oil and gas; such as solar power, biofuels or electricity. We can all start slow with using gas saving techniques, buying cars that get great gas mileage or even hybrid cars. But these automobiles will only slow the problem down but not stop it. We need to become completely independent of oil and to do so will require a lot of change. But it seems to me that people are only willing to change something that works when we absolutely have to. So sometime in the near future we better hope that an reliable alternative is discovered or else our future looks very bleak.

Works Cited

Honarvar, Afshin. "Theoretical explanations for asymmetric relationships between gasoline and crude oil prices with focus on the US market". OPEC Energy Review 33.3/4 (2009): 205-224. Academic Search Complete. EBSCO. Web. 9 May 2011.

Wood, John, Gary Long, and David Morehouse. "EIA." Long-Term World Oil Supply Scenarios. Energy Information Administration, 18 August 2004. Web. 5 May 2011.
<http://www.eia.doe.gov/pub/oil_gas/petroleum/feature_articles/2004/worldoilsupply/oilsupply04.htm1>.