Why are gas prices on the rise...AGAIN
Well because it’s that time of year...again. Winter is starting to thaw and we are all looking forward to spring and summer, unfortunately the oil industry is looking forward to spring and summer as well. During the warmer months oil demand and oil consumption rises leading to higher prices, but it’s not that simple. In fact when it comes to any GLOBAL market nothing is ever simple. So, why exactly are gas prices going up this year? There are numerous factors which go into creating our gas prices, but a few weigh more heavily on the market than others.
What IS behind the rise of gas/oil prices:
The Arab Spring/Tensions with Iran: "Whether is Libya, Egypt or Iran, which is locked in a bitter dispute with the West over its nuclear program, Iran exports 2.2 million barrels of oil a day, mostly to Asia…More importantly, Iran sits astride the Narrow Strait of Hormuz, through which one fifth of all the world's oil production passes."
Growing demand: "Chinese growth is particularly important as it is driving its oil consumption growth...Chinese growth, along with growth from other developing counties, means the world is expected to use more oil in 2012 than it ever has -- over 90 million barrels a day, according to EIA."
Speculators: "Gasoline investor interest is even greater, according to Tom Kloza, chief oil analyst at the Oil Price Information Service. Kloza said there is now $12 billion in fund money -- the most ever -- betting on a higher price for the benchmark U.S. gasoline contract."
Refineries: "Several refineries along the U.S. East Coast have recently closed. The refineries closed because, ironically, they weren't making any money...They were older refineries that could only process the type of light, sweet crude currently being imported from Europe -- the type of oil that is very expensive." http://money.cnn.com/2012/02/28/markets/gas_price_rise/index.htm?iid=HP_LN
What IS NOT behind the rise of gas/oil prices:
OPEC production decisions: "The cartel is actually producing more oil than is required to meet demand."
Non-OPEC production: "A rise in oil output from the Untied States, Brazil and elsewhere is balancing out production declines in Mexico, Russia and other countries. "
Weather: "A warm winter in the United States balanced out a particularly cold one in Europe."
Inventories: "This is oil stored in tank farms at refineries and other places. The amount of oil here is generally at average or above average levels."
The dollar: "A falling dollar tends to boost oil prices, but the dollar has actually gained against the euro in the last two months."(Sorry Sen. Rand Paul the experts say otherwise... http://video.foxnews.com/v/1478040354001/gas-price-concerns-whats-to-blame/?playlist_id=86858 )
Listen you are going to hear a lot of things in the coming weeks and months about rising gas prices from politicians seeking nominations (cough...Newt Gingrich) or reelection in 2012. However be cautious, as “House” my favorite TV doctor says…“everybody lies”... It is an election year those involved will be looking to score cheap political points by assigning blame or making promises…even if the blame is unwarranted or they can’t deliver on those promises later.
If you want a fact that might make your head explode here you go…America’s #1 EXPORT IS GAS. Yep, that’s right the same country who IMPORTS more gas/oil than any other country on planet earth also EXPORTS gas/oil more than anything else. How can this possibly make sense? Well when you mix in the weak economy and lowering demand from Americans having more fuel efficient cars/trucks domestic oil companies have shipped more oil from our domestic refineries overseas into the global market. Why do oil companies do this? Why else...money! In the global market oil companies can make more money selling gas/oil to countries with increasing demand and increasing consumption. Basically this time the "free market" is biting us in the butt...er...wallet. However its not all bad (to find the silver lining) any gas/oil shipped from America into the global market will lower the price of gas/oil overall, it just wont help us out AS MUCH AS if it were kept here at home.
The bottom line is this….The oil market is GLOBAL and while there are some things we can do, there are a number of factors that are simply out of America’s control. So given the reality of global economics and its impact on gas/oil prices, what do you think America should be doing to lower gas prices?
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