Why Are Gas Prices So High?
Recently a youngziner asked us, “Does the fuel we use at gas stations come from Japan? Is this the reason why gas prices are going up?” It is a very thoughtful question and one we believe deserves an in-depth reply.
Gasoline demand in the US
The gasoline prices at the pump have been getting very expensive recently. The last time we saw prices rise this high was in July 2008. Although US is the 3rd largest crude oil producer in the world, US imports about 51% of its oil -- most of which comes from Canada, Venezuela, Saudi Arabia, Mexico and Nigeria. Now, this crude oil goes through a refining process, and at different temperatures, different products are produced such as gasoline or other petroleum products.
The largest US refineries are located in the Gulf of Mexico region. Refined gasoline and other byproducts are transported along the Mississippi river upstream, and via trucks from the river heads to various gas stations all over the US.
Law of Demand & Supply
Prices of all products are affected by what economists call "Supply and Demand" -- lets try to understand that. Imagine, there are 20 kids in a clubhouse and only 5 computers available to play your favorite video game. The demand for computers will be far greater than its supply.
Now, imagine if you could use candy to trade computer time. Do you think you will have to give up more candy for the computer time, than in another club house where there are 20 kids and 20 computers? Think of situations where there are 20 kids and 40 computers, or a case where you have an unlimited supply of candy.
You may have rightly guessed that the more the number of computers, the less candy it will cost you. Also if the candy does not have a value for you (unlimited supply) -- you may be willing to give whatever it takes to get you the computer time! So you see how the price (number of candy) is a function of supply (availability of computers) and demand (kids). When either the demand increases or there is a supply issue, prices of items tend to go up.
How natural disasters affect prices?
Weather patterns -- such as hurricanes or floods, or political problems in countries that export oil can affect the movement of oil tankers bringing crude oil to the refineries from various parts of the world. Demand for gasoline tends to go up during the summer season when people drive more, or after disasters, when people need to rebuild their communities. As prices go up, it will start reducing the demand as less people can afford it. So you see how demand and supply change continuously -- like a see-saw, and cause gas prices to fluctuate.
More recently Governments around the world have been printing money to ease the lives of people affected by the recent recession. When the supply of money around the world has gone up (like the unlimited candy situation), the price of goods go up.
It is true that the Japanese reconstruction effort has had some effect on oil prices. But as you have seen, the combination of several other factors such as the world money supply, natural disasters, higher costs of producing gasoline among others, are creating a hole in our pockets, every time we visit a gas station.
Want to learn more?
Energy facts for kids
How Gasoline works
Supply and Demand : For the more advanced
you can just walk or ride a bike to where ever your are gonna go
they should lower the prices
They should really make some changes.
gas prices are so high because were running out gas on this planet.
Wow! I hope anything is free.
The gas prices have to go less
Well i think the gas price should go lower.the people have to keep track of how many times they go to the gas stasion.
wow everything should be free. gas prices are very high
Why should everything be free? Everything is never free; it will still cost something.
Yeah that is pretty pricey.
I think that the gas prices should go lower, or at least go back to normal because seriously, how much can they really expect of people for something we basically need. They really need to make the prices reasonable for the amount we get. I HIGHLY disagree with the choices these people are making.
I wish everything was FREE!
I wanted to say this doesn't make since to me and its hard for me to understand why I just read a passage saying are economy is doing better, and now seeing gas prices up?
Here is one of the simplest solutions that America can take to at least lower the gas prices a little bit:
They can release more permits to companies to drill for oil in America. And they can stop exports to other nations.
the brazilians really are using other things to take the place of the gas. do you still have to drill into the ground to get the ethanol?
Ethanol is made out of corn.
we should switch to ethanol. in brazil, a lot of the cars use ethanol, which is SO much better for the environment
If we switch to ethanol, we will be using up a large amount of the food supplies. One of the reasons why we are having food problems, according to a past YZ article, is because the American Government is trying to use ethanol to power cars. It didn't work.
Gas is very, very pricey I can believe it. Gas prices need to go down!!!!
I think this was a very interesting article. I feel as if they should do something about it to make the prices more reasonable for a daily usage that we kinda need.... basically..... Maybe they should come up with a different system for getting the gas so it isnt as hard.. i don't know, im just brain storming.... I would really appreciate the prices going lower for my mom (:
people should seriously stop driving so much and then the gas prices can lower
i understand why the prices are so high
because there's less gas and its getting harder to produce so now its almost a privilege to have gas
Why are the gas prices so high i think they should go down.
I am going to ride a bike when i grow up.
In our school, the Jpods CEO Bill James came. He taught us about about how Jpods are more efficient. For more information go to, http://www.jpods.com/
Gas prices should be lowered.
It`s not that easy you know.
Why do people use oil anyway? They say because we`re using cars and refrigerators so much, that the sun is getting hotter and hotter everyday. That`s why we`re having global warming. But if we stop using energy so much, we might not have global warming. I wish there was another way to go fast and not use energy at the same time...
When I was was young I thought that the gas price was like 2 dollars , now I realise that it is A LOT higher! That makes me mad because I am very conscious spender. Also, my parents are always complaining about gas prices. We always roam around for like an hour trying to find the lowest price.
The gas prices should be made a little lower or if people are complaining to much about gas prices, then they should just get an electric car and it would be cheaper in the long run. Right now there are so many electric cars and cars that have alternative powers so why can't people just buy them instead of complaining about gas prices.
Electric cars are made using gas.
For the electric cars, where is the energy coming from? From coal and gas! You need to power it somehow, and most cars are powered by gas or coal which is then converted to electricity. Did you know that a Prius makes a larger carbon footprint than a Hummer?
Thought provoking..........
I wonder, if can we really make our driving cheaper with electric cars. Take at look at this link. http://www.youngzine.com/article/lights-out-earth-hour
With over 75% of the energy to the electrical grid from fossil fuels - coal, oil & natural gas, would we be putting more demand on the same resources through an alternate route I wonder?
The gas prices are like, really high. But they can`t help it.
I hate high gas prices.I don't have a car though.
I think that the gas prices should go lower, or at least go back to normal because seriously, how much can they really expect of people for something we basically need. They really need to make the prices reasonable for the amount we get. I HIGHLY disagree with the choices these people are making.
electric cars will help or if u can get cars to run on sea water!
I think it's bad they are high because they have become such a great part of our life. Hopefully we can work out having more gas for us so the prices drop. I know my family doesn't like the prices, and now teenagers get cars too and have to pay for gas. Hopefully they come up with an alternative!
it goes back n forth so i cant realy tell
that's great I am going to be driving in 7 months. is it true that the japanese reconstruction affects oil price
Drive less
Ride a bike.
Good solution.
It is a problem that gas prices are so high. Gas prices are outrageous.
I think they should go to a diff. alternative
Gas prices are outrageous. People spend so much money a day on gas. its to much.
The price should seriously go down.
i think they should raise the price if its more than a certain amount of gas, and maybe they should keep track of how many times you go to the gas station a day, and if you go more that a certain amout of times, then yes it should raise.
I think its because of the accident in Libya it got the workers off track.