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Why Are Gas Prices Rising

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The consumption of gasoline in the USA is dropping as prices skyrocket. And yet gasoline prices continue to rise. Why?



Who controls gas prices is a question that many consider. Looking at market forces, Supply and Demand, provides a partial answer.

On the Supply side, the disparity between growing oil resources (new oil discoveries) and oil production has been increasing since 1980 as the growth in production outpaced the growth in oil resources. Economists are predicting that oil prices will continue to rise until a new market equilibrium is reached where supply satisfies world demand. Also, the turbulence in the Middle East, especially in Iraq, and the instability in West Africa, has led to a reduction in oil exports.

On the Demand side, the most significant factor affecting oil prices has been the increasing demand worldwide by emerging industrial countries: India and China, specifically. These two countries are becoming huge oil consumers as rapid urbanization, growing industries, and higher living standards dramatically increase energy usage. China has seen a doubling of oil consumption over the last 10 years, and expects another doubling in less than a decade, as oil consumption has been increasing by 8% per year since 2002.

Transportation accounts the largest share of oil consumption, reflecting the growing rate of vehicle ownership. China and India are experiencing rapid growth in vehicle ownership which now accounts for 75% of total oil consumption. This compares to the USA at 70% consumption by vehicles.

Also, as world population increases, so will the demand for oil. Production per capita peaked in 1979 when population growth exceeded oil production. Since then it has been declining. World population in 2030 is expected to be double that of 1980.

So, who controls gas prices? Perhaps OPEC by controlling exports. Or the large integrated oil companies like Exxon Mobile and ConocoPhillips who are making record profits. Or even the companies in the distribution chain: the refiners and gas station owners.

Who controls gas prices? Many would respond that it is the large integrated oil companies. Why? Because the oil companies sell their oil to the highest bidder, and then repurchase the oil from the lowest cost supplier.

Who controls gas prices today is predominantly the Institutional Investors. Hedge fund manager Michael Masters testified before Congress in May of 2008 about his belief that "What we are experiencing is a demand shock coming from a new category of participant in the commodities futures markets: Institutional Investors...". While the press generally cites the increase in demand over the last five years from China for the rise in prices, it fails to mention that the during this same five year period Index Speculators' demand for petroleum futures has increased nearly equal to China.

OPEC's Secretary General Abdullah al-Badri provided statistics in June 2008 that showed rampant speculation in the oil-related financial markets. According to al-Badri, the "paper market" for oil equals nearly 1.36 billion barrels daily, or about 15 times the 87 million barrels daily of current world consumption.

Institutional Investors face very little oversight regulation with regard to manipulating the spot price of oil. As a result, they truly do control its price.

What can we do about it? We could wait for Congress to introduce new legislation to end the manipulation by the Institutional Investor. We could wait for the SEC Chairman to take the necessary action to control this situation. Or we could take action ourselves by reducing our consumption of gas in our own vehicles.

The automakers will be introducing high mileage vehicles in the near future. GM has announced its Chevy Volt, an EV (electric) for 2010 with a small engine for recharging the batteries. The Volt is expected to average over 150 mpg.

There is also the Hydrogen Fuel Cell car, which is at least a decade away (I don't hold much promise for this design).

And there will be the next generation of the current Hybrid car: the pluggable Hybrid. With advances in battery technology, this next generation Hybrid will average over 100 mpg. It is slated to be introduced in 2010.

However, there is something we can do today to dramatically increase gas mileage (up to 50%) with existing technology. It is inexpensive and easy to install on our vehicles. It is not harmful to the engine and will reduce emissions.

The system improves gas mileage by capturing wasted energy from the engine and then reintroducing it to the engine as needed. This is same approach that Hybrid car technology applies. Wasted energy occurs when the engine is idling, usually when the vehicle is at a standstill or when it is coasting down a hill. The system captures the wasted energy by converting water to a highly combustible gas, oxyhydrogen (HHO) through electrolysis. It's like running your car on Water.
Why Are Gas Prices Rising
I don't know about you, but the continued increase in the cost of gas that we are paying at the gas pump is kicking me where it hurts! What's that you say? I say in my wallet and I'm sure you may be feeling this same pain as well. I'm sure you're wondering like me, how high will the gas prices go? Some predict that the fuel prices may escalate to $10.00 or more a gallon at the pump. I don't know about you, at that point or even possibly sooner the price hitting that level, there is really no point in going to work! You would be probably working to pay for gas to go into your vehicle and virtually nothing else. Most people are average folks just trying to make it in our economy and it would be difficult for them to manage paying high gas prices that continue to go up! As a matter of fact, it may already be difficult for some people. We are already at record level gas prices at the present time. In some places the price for regular unleaded gas is already over $4.00 per gallon and steadily approaching $5.00 per gallon as of this writing. It appears that the future outlook on the gas prices coming down are bleak and the stress on our wallets will continue.

High gas prices impact almost everything we try to do in some form. That's right, most everything we do we are impacted by the high price we are paying for gas. The higher gas prices eventually trickle down to cost us more in such areas as: food, clothing, airfare, utilities, entertainment, retail products, etc... Just think, we are getting hit left and right with increased fees in these areas due to the high price that we are currently paying for gas and appears will continue to pay for a long period of time. Some think the high gas prices are here to stay. So much for having extra money to spend on other things! We're going to be busy trying to put the money we have towards gas for our vehicles to get from point A to point B. We'll be trying to make sure we have enough money to purchase gas to get to work and necessary places we need to go. We find that we really do not have much money left to spend for unnecessary purchases, entertainment or other activities.

What can we do to help ourselves in these hard times while we're trying to deal with our anxiety and sometimes anger over these extremely high prices we are paying for gas? Here are some tips that you may want to consider to help you cope. You may find that you have already started to make some of these adjustments already:

1) Consider using public transportation if this is something you can realistically do. The modes of public transportation you may consider would be: bus, train and car pooling.

2) If you have a bicycle, consider using this mode of transportation for local short trips if this would be realistic of course.

3) Go to places that are necessary and actually needed. In other words if it is something you want to do and it is not needed, don't do it. Consider letting your needs supersede your wants to save in your wallet on gas. For example, necessary trips would be: work, school, doctor appointments, etc....

4) Reduce your leisure, entertainment and travel commuting distances. Consider doing more of these activities at home or near your home.

5) Consider purchasing a vehicle if this is within your budget to assist you in reducing the cost you are paying for your overall fuel costs. Look for vehicles that provide higher mpg(miles per gallon) for the freeway and city. You may want to even consider a hybrid vehicle.

6) Slow down! Reduce your speed on the roadways you travel on. This will also assist you in better fuel economy. Put less petal to the metal!

7) Try to make your trips to the places you need to go count. Make a list beforehand of the places you need to travel and consider consolidating your trips. This means instead of making several multiple trips you combine trips(consolidate) by going to the place you need to go along the way and your list will assist you with this. For example, if you need to go to your local grocery store, cleaners and post office, just plan to make one trip instead of three separate trips back and forth from your home. You would take your list and stop at each place you need to along the way and strategically make sure that you plan your stops based on where these particular places are located. This really can work well if you plan your list ahead of time. Just by doing this you can save on gas!

8) Try to locate and compare prices of gas stations in your area to determine who has the lowest price on fuel and consider going there for gas. A good way to do this is when you are driving to the places you need to go, just observe the gas station prices along the way and you will be able to determine which locations have the best prices for your money.

9) Talk to your relatives, friends, neighbors, coworkers and others on the gas stations they are getting their gas from. You can compare with each other on which gas stations have the lowest prices to get your fuel from. You would be helping each other. This is similar to networking.

10) Make sure your tires are property inflated. This can also assist in providing you with better fuel economy.

11) Count from one to ten and try to relax before you start to pump your gas to assist you in relieving your anxiety and stress over the amount of money you will be paying for the gas you are about to put into your vehicle.

Who knows whether or not we may get some relief on the amount of money we're spending on gas. However, it is unclear if this will happen anytime soon. In the short and long run we must do what we have to do to help ourselves through this major problem that is affecting our wallets. So, do what you can to help yourself and your family to reduce the amount of money you may be spending on gas.
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