Oil Resources

Another claim is if we should tap into the oil reserves to lower the prices of gasoline in the United States. The argument right now is that we shouldn't tap into the reserves because gas prices are not as bad as they can end up being. In Europe most vehicles are diesel operated simply because they can acheive a better mile per gaollon than gasoline powered vehicles. But with the EPA (Enviromental Protection Agency) keeping strict restrictions on the different emmision levels and the unwillingness to change by a lot of Americans is what is holding us back. Most Americans do not want to give up the larger vehicle that does not get very good fuel economy. In Europe though, the prices are much higher for a gallon of gas. Some will argue that we should wait until the price of gas is equal to that of Europes to tap into the reserves. Others will argue that by waiting then the cost to produce different goods produced by farmers will go up. And the cost to transport goods will also increase which will increase the price to the consumer.

Another argument is to look into renewable resources for powering our vehicles. Battery powered vehicles have not taken much popularity in the U.S but hydrogen powered vehicles and ethanol powered vehicles have gained recent popularity. I believe the fact that the battery powered vehicles can not travel as far without having to recharge again is what is holding many individuals back from not wanting to puchase one. But with hydrogen, an individual can travel almost as far as a gasoline powered vehicle but it is a resource which we have plenty of. Same with E85 ethanol which is processed from corn. The U.S is a important supplier of corn.

Oil companies price gouge?

Do oil companies make a larger profit by price gouging? If they do, is it really fair?  The united states does not heavily tax gasoline like most other countries in an attempt to try and preserve consumption. Some companies will wait until the price of gas has increased to a certain point so they can make a higher profit. It could compared to a mining company. Some companies may have started to price gouge just to make a higher profit, it is unclear to me at this point. I am still researching into this claim, http://www.msnbc.msn.com/id/10082724/ns/business-answer_desk/

Is oil becoming harder to find?

If oil is becoming scarce or harder to find then this would be one of the reasons for the price increases. Based on http://www.newser.com/story/112166/exxon-oil-becoming-hard-to-find.html, Exxon states that they are having trouble finding oil and that their reserves are decreasing in size. For every, 100 barrels of oil purchased they are only able to replace 95 of them.

According to http://www.telegraph.co.uk/comment/3557898/Oil-is-expensive-because-oil-is-scarce.html, three of the major oil companies, Shell, Exxon, and BP are all reporting drops in oil outputs. Exxon reported a 10% drop for the year. Non-OPEC oil production has only inscreased in Russia. Oil production is decreasing in 60 of the 98 oil producing countries.

Finding such information has made an interesting discovery for me. I have found two opposing point of views on why gas prices are so high. The idea that has is becoming scarce and that is why the prices have risen and the contrasting idea of the big oil corporations wanting to maintain profits by tac breaks and price gouging are two interesting ways of looking at things. I plan to explore more into details on both of these.

More Research

I did some more research into finding out why gas prices are continuing to increase. I was pleased to find some great answers at http://www.financialnut.com/why-are-gas-prices-so-high-now/. Like I said before the cost of  a gallon of gas is mostly deteremined by the cost of crude oil, about 71%, 14% taxes, 10% marketing and 5% towards refining. The expansion of many countries economies have increased the demand for oil because oil is what drives these economic booms. With a much higher demand for oil and the supply not increasing, the obvious answer is to charge more for the oil. I also found it interesting to know that exchange rates play an important role as well because oil is exchanged in dollars. So the value of a dollar is quite important to the price of gasoline. The most interesting thing I found though, was basically that politics doesn't play as major of a role as I thought it did. Yes, government does play a important role in pricing gas but no to the extent I once believed. I think the idea of economics just makes a little more sense to me rather than just blaming it on other things. Again, I do realize that the government does play a role in the pricing of gas but I just think the economics plays an even bigger role.