Why are gas prices so high? This is a question that frustrates consumers throughout the United States as they restrict travel plans, cope with rising prices and look for solutions to bring relief. Is it the economy? Is it the war in Iraq? Is it EPA standards? Is it OPEC? Is it the lack of drilling in Alaska wilderness that many what to see remain protected. What is the issue?
Answering Why Are Gas Prices so High
There is no easy answer to the question of high gas prices. Instead, there is a combination of answers that includes a yes to all of the questions asked above. Summer travelers have long been plagued by rising gas prices in summer time. It's a very typical time for prices to go up, usually in response to summer travelers road tripping. Issues also arise in the long term storage of winter fuels. Fuels that are not completely utilized in the winter increase storage cost; that cost is then passed on to the consumer. EPA requirements for urban areas include summer-grade reformulations of fuel; this cost also tacks on some extra cents at the gas pump.
Crude Oil Costs
OPEC sets the world standard cost for crude oil. The cost of crude oil is a main contributor to higher gas pump prices. The higher cost is not due solely to tensions in the Middle East or to the burning of Kuwaiti oil fields in the mid-1990s, but to the increasing demand around the world for oil. India and Asia have emerged as huge oil consumers over the last decade and compete with the United States and Europe in oil consumption.
India has seen a 31 percent growth in automobile sales from 2007 to 2008. With economists expecting further growth to the Indian market, this just means more oil will be in demand from this country. While OPEC sets the standard for the cost, their price is also dependent on oil production and storage capabilities. Storage facilities have not grown in accordance to demand, thus oil from several different producers may be shipped by pipeline to one storage facility and processed.
Oil is available from Russia, Venezuela and other countries not controlled by OPEC including the United States, but the storage issue is still one that confronts these oil producers. Exxon may have seen increased profits from the rising gas pump prices, but they are seeing it on the storage end of their business holdings rather than on the production end of their business holdings.
EPA standards have been pushed higher and further in the last decade than ever before. Car manufacturers' work to keep up with the demand, including transitioning vehicles from leaded to unleaded fuel consumption, hybrid vehicles and more. The Clean Air Act Amendments of 1990 mandates that all fuel be oxygenated to 2 percent for urban areas. According to the EPA the United States has over 40 different types of fuel regulations for different areas and different times of the year. Fuel processing for heavily urban areas such as Los Angeles and New York are significantly higher in cost than for small towns in Nebraska.
Winter fuel that is not consumed by April in some areas must then be stored over the summer for sale in the autumn. This contributes to rising fuel costs everywhere. The switch from oxygenated fuel to ethanol based fuels in some areas also increases cost. Ethanol cannot be shipped via pipeline and is produced in a limited area of the country. It's also water soluble which means it cannot be added to fuel until just before it arrives at the fuel pump, thus tacking on more than a few cents.
Regulations, Environment and Demand
Gas prices are high because of the supply versus the demand, the regulations that environmentalists supported and continue to support and the need to protect the natural environment. The solution of drilling in Alaskan wilderness is not an answer to short term problems and may generate even greater long term problems than it solves. Europeans have confronted high fuel prices for most of the last decade, paying two to four times as much as Americans because of the same issues that work diligently to keep the air in their larger cities clean and to protect the natural resources in their native lands.