Why Gasoline Prices are High and Still Rising

 Why Gasoline Prices are High and Still Rising.

Gavin Nettesheim

In the last 12 months gas prices have jumped up drastically, they have roughly gone up $2.11 a gallon an estimated 61% increase from this exact time last year. The problem with gas prices rising so rapidly is that America has the highest amount of gasoline consumption in the world using roughly 369 million gallons or 8.8 million barrels of gasoline per day. Gasoline consumption also has a trend in America to rise every year so if this trend continues the prices on gasoline will increase and the supplies for gasoline will decrease.

Another reason why gasoline prices have risen is because the price of the supplies for gasoline production has increased due to supplies decreasing. According to Tom Klaza, global head of energy analysis at the Oil Price Information Service, “Gasoline you get at the pump is really containing eight or nine different elements, all of which have increased in cost in recent months.” The price of supplies needed for gasoline production is just one of the factors that plays into the cost of gasoline production, they also need the machinery to mix all the elements and refine it. Once everything is all refined and regular gasoline you get at your pump they then need to pay people to deliver it and advertise it to companies. 

Even though gas prices are terrible right now there are some solutions that could temporarily decrease the price of gasoline. One of those solutions is the release of more oil reserves, but at the same time oil is a very limited natural resource so we should try and save as much of it as possible worldwide for when it gets more scarce. On the other hand we can reopen some pipelines to extract oil so the price of oil decreases overall and decreases part of the cost for gasoline production. Another solution that hasn't proved to be sufficient yet is cutting the tax on gasoline, the Florida Governor cut the 35% gasoline tax which is used to fund the public transportation infrastructure, he argues that the federal infrastructure bill will be able to make up for the lost revenue but that has yet to be proven.

The main factor that plays into the rises and drops of gasoline prices are supply and demand, so if the elements used for oil production are very inflated due to limited supply then gasoline manufactures will also have a finite amount they can produce. The demand for gasoline is also increasing and gasoline is a very inelastic product so people will pay high prices for it because it's such a necessity to our everyday lives. Although gas prices might drop eventually that will not be the last problem due to natural resources being limited.

“Frequently Asked Questions (FAQs) - US Energy Information Administration.” EIA, 7 September 2021, https://www.eia.gov/tools/faqs/faq.php?id=23&t=10. Accessed 16 March 2022.

Sanicola, Laura. “Explainer: What is happening with U.S. gasoline prices?” Reuters, 24 November 2021, https://www.reuters.com/markets/commodities/what-is-happening-with-us-gasoline-prices-2021-11-24/. Accessed 16 March 2022.