High Gas Prices -- What is the Real Cause

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High Gas Prices -- What is the Real Cause

Author: Matthew Paolini | Total views: 51 | Word Count: 537 | Category: Auto | Date: Jun 17th 2007

Search for: gas prices, oil refineries, Big Oil, gas pump, refining capacity

Gas prices have been steadily climbing for most of this year - though the costs around the nation have dropped slightly in the past week -- and are threatening to become 'the' story of the summer. The nationwide average price for a gallon of unleaded regular gasoline now stands at just above 3 dollars, up a full 25 cents from one year ago.

A good number of consumers are heaping abuse on the 'Big Oil' companies, who are reaping huge profits from the high gas prices. However, in an industry as complicated as the oil/gas business it is difficult to figure out exactly what the causative factors are. Commentators have run the gamut, from blasting oil companies, to pointedly noting the lack of domestic oil refining capacity, to reluctantly stating that the supply of oil may be running short -- although those who assert the latter are certainly in the minority at present.

Fuel consumers nationwide are justifiably concerned about the rising prices. Recently in Texas the average price of retail gasoline went higher for a 14th straight week. A weekly AAA-Texas gas price survey showed that price trends were mixed, with prices reaching record highs in some areas but going lower in others. AAA spokeswoman Rose Rougeau said that Texas cities Amarillo and El Paso were at all-time highs, while prices edged lower in eight other cities. Rougeau stated that strong consumer demand, decreased domestic output because of refinery problems and lower gas imports apparently are still combining to keep prices high.

In nearby Arizona, gas prices also recently rose for roughly 14 week in a row. According to an AAA-Arizona survey, the statewide average for a gallon of self-serve unleaded regular was 3 dollars and 9 cents per gallon. That's a penny below last summer's costliest price, and getting closer to the all-time record of 3 dollars and 13 cent per gallon set in September 2005.

On the theories of why fuel expenses keep going higher, the shortcomings in oil refining capacity seems to be the most widespread response. Some industry experts blame Congress, positing that the legislative body is preoccupied with forcing car companies to meet out-of-reach targets for fuel efficiency, while not taking the time to address the oil refining issue. On May 8, the Senate Commerce Committee voted to raise fuel economy standards to an average of 35 miles per gallon by year 2020 for cars and light trucks, with standards rising by 4 percent annually until 2030.

According to some industry observers, Congress has discouraged the construction of new oil refining capacity through proposed legislation that penalizes refiners when prices rise, that gives onerous and costly permit requirements for construction of new refineries and increasing the size of existing sites, and that allows for a degree of tort risk.

Building more refineries would certainly ease the problem of supply, but because they have been proven to be so damaging to the surrounding environment, it is very difficult to find a community that will support a new refinery. Under the logic of 'NIMBY' (Not In My Backyard), consumers like to fill their cars up at low prices, but they don't want a refinery close to home.

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Matthew Paolini is a consultant with Citybook.com for the Miami, FL business Yellow Pages division.

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Gas prices have been steadily climbing for most of this year - though the costs around the nation have dropped slightly in the past week -- and are threatening to become 'the' story of the summer. The nationwide average price for a gallon of unleaded regular gasoline now stands at just above 3 dollars, up a full 25 cents from one year ago. 
 
A good number of consumers are heaping abuse on the 'Big Oil' companies, who are reaping huge profits from the high gas prices. However, in an industry as complicated as the oil/gas business it is difficult to figure out exactly what the causative factors are. Commentators have run the gamut, from blasting oil companies, to pointedly noting the lack of domestic oil refining capacity, to reluctantly stating that the supply of oil may be running short -- although those who assert the latter are certainly in the minority at present. 
 
Fuel consumers nationwide are justifiably concerned about the rising prices. Recently in Texas the average price of retail gasoline went higher for a 14th straight week. A weekly AAA-Texas gas price survey showed that price trends were mixed, with prices reaching record highs in some areas but going lower in others. AAA spokeswoman Rose Rougeau said that Texas cities Amarillo and El Paso were at all-time highs, while prices edged lower in eight other cities. Rougeau stated that strong consumer demand, decreased domestic output because of refinery problems and lower gas imports apparently are still combining to keep prices high. 
 
In nearby Arizona, gas prices also recently rose for roughly 14 week in a row. According to an AAA-Arizona survey, the statewide average for a gallon of self-serve unleaded regular was 3 dollars and 9 cents per gallon. That's a penny below last summer's costliest price, and getting closer to the all-time record of 3 dollars and 13 cent per gallon set in September 2005. 
 
On the theories of why fuel expenses keep going higher, the shortcomings in oil refining capacity seems to be the most widespread response. Some industry experts blame Congress, positing that the legislative body is preoccupied with forcing car companies to meet out-of-reach targets for fuel efficiency, while not taking the time to address the oil refining issue. On May 8, the Senate Commerce Committee voted to raise fuel economy standards to an average of 35 miles per gallon by year 2020 for cars and light trucks, with standards rising by 4 percent annually until 2030. 
 
According to some industry observers, Congress has discouraged the construction of new oil refining capacity through proposed legislation that penalizes refiners when prices rise, that gives onerous and costly permit requirements for construction of new refineries and increasing the size of existing sites, and that allows for a degree of tort risk. 
 
Building more refineries would certainly ease the problem of supply, but because they have been proven to be so damaging to the surrounding environment, it is very difficult to find a community that will support a new refinery. Under the logic of 'NIMBY' (Not In My Backyard), consumers like to fill their cars up at low prices, but they don't want a refinery close to home. Article Source: <a href="http://www.articlesoft.com" target="_blank">ArticleSoft.com</a> About the Author: Matthew Paolini is a consultant with <a href="http://www.citybook.com/">Citybook.com </a> for the <a href="http://www.citybook.com/florida/miami/categories-4826.htm">Miami, FL business Yellow Pages</a> division.

Tags: gas prices, oil refineries, Big Oil, gas pump, refining capacity