It's really simple - demand is exceeding supply.
China's economy is growing, as is their dependence on oil.
Oil can only be extracted at a certain rate or barrells per day.
Not to mention, there is less and less economically recoverable oil, so the cost to extract it from the ground is going to cost more as well.
On top of that, no new refineries have been built in the US for years, which contributes to the problem.
What's worse, is when one or more of those refineries or when the refining capacity takes even a minor hit, the ripple effect can be catastrophic.
A 10% reduction in refining capacity due to a hurricane will have a huge effect on supply, while demand stays the same.
Factor in other variables like "regional" fuels, for which the requirements were just suspended - oil companies have to create different blends of fuel for different regions, based on local and state regulations. So while fuel may be cheap and plentiful in Atlanta, it may not be in San Francisco, for example, based on that regions regulations.
Or remember a few years back in Arizona, when they had that gas pipeline problem and had a gas shortage due to the fact that they had to use a regional blend?
This over-reliance on a
select few heavily-regulated refineries for special blends of gasoline allows for significant disruptions in prices if a single refinery encounters problems, or if demand temporarily exceeds total operating capacity.
Is OPEC engaging in price fixing and collusion?
Somewhat, but we get our oil from other places than the Middle East, such as Venezuela and Mexico.
Regardless, the oil companies have to pay what OPEC and other countries sell their oil for, convert it gasonline and and sell it.
Cheap, plentiful oil would benifit the oil companies, because they could increase their profit margin on a gallon of gas, and sell more of it, since lower prices would lead to increased use.
The oil companies would rather pay $35.00 per barrell than $70.00 per barrell.
The reason some oil companies (not all, as some US oil companies lost money last year, which never seems to get reported) are making record profits is because they are selling a record amount of product, due mostly to demand.
Also, some oil companies extract a certain percentage of their oil, while buying a percentage on the open market.
The companies that are in a position to extract oil than buy it are going to maximize their profits.
When people break out the "oil companies are making record profits" argument, it doesn't always tell the whole story.
Also, when oil companies make profits, people act like that's a bad thing.
They're a business, and they're in it to make money.
If they don't, they go out of business which leads to more monopolies, more price-fixing etc..
Profits also are used to explore for more oil and to maximize the make the extraction process more efficient, which leads to more supply for the consumer.
On the other hand, price-gouging in emergencies does take place, and those responsible need to be held accountable.
And the oil companies aren't exactly the most ethical businesses out there, but too many people make the intellectually lazy argument of blindly blaming them instead of actually doing the homework and learning how and why things are the way they are.
It's always easiest to blame "the man" for whatever, just like many afc's blame others for their lack of success with women.
And I wouldn't expect gas prices to come down much either, as the amount of economically recovarble oil becomes more and more scarce.
Their is lots of oil of the CA and FL coasts and in Alaska, but laws and regulations currently prohibit or exploration or make it not cost-efficient.
Long-term is to explore other options, such as Hydrogen powered cars, but that too is not cost-effcient at this point.
Bottom line is that things will get worse before they get better, and there really is no one to blame or fault, although doing so might make some people feel better.
:cuss:
