The recent increase in gas prices for the regular American user has caused a furor in the US. Gas prices increased from 90 cents in 1999 to $4 in 2008. Let’s examine the the causes that led to such an increase in Gasoline prices since 2004.
DEMAND (2004)
The one main reason for the high price is the increase in consumption of more oil, which has caused a whooping 70% increase in prices. The reason for this could be tracked back to the 1990s where there was very low taxes on oil prices and people were encouraged to spend more on ravishing SUVs. It was pre-assumed that gas prices would never rise much and so instead of travelling economically, people started travelling the luxurious way. The constant increase in this mode of travelling was one of the main reasons to increase demand and the price too!
By 2004, demand started acceding supply and when this happens, you know the drill! Prices soaring, people suddenly getting the economic punch and everything is in a commotion. Oil consumption graph exceeding way above the oil producing graph. So much for the luxurious SUVs.
Natural Disasters (2005)
America once again faced a disastrous situation that left its economy shaking. Hurricane Katrina, one of America’s most dangerous hurricane to strike caused immense loss to the US refining system.
This suddenly caused gasoline prices to jump up to $3 a gallon. A huge jump across the graph considering the problematic supply demand curve.
Political Problems (2006/2007)
The political tensions between Iran, Iraq and the Bush administration, made them lash out at each other and the countries restricted their oil supply. Geopolitical events caused the public to suffer. Nuclear programs and their issues were given precedence over the oil issue and thus again caused prices to rise above $3 a gallon.
Investors Enter (2008)
In 2008, seeing the flaw in the oil market system of the US, spectators jumped in to seize the opportunity and these people stirred the price to go up to $4 a gallon. Investors always want to earn high revenue despite the falling market. They prey at potential companies and at the end of it people have to suffer the impending costs, which may be expected to even rise higher.
Solution
There is nothing one can do about $4 gas price, and there is also no hope of it going down and no promises of it remaining stable. With each American family in some kind of debts (credit usually) it is better now to travel economically by walking, biking or by bus instead of wasting money on driving SUVs. Its time Americans learn how to live economically and independently from credit cards,luxury items and many other such demands that has left a family making it difficult to make ends meet.
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