Why Gas Price Is Rising in the United States

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Table of Contents

Introduction
Main body
Conclusion

Introduction

US gasoline prices are steadily rising up. The fast-rising began in March this year and rose up to 40 cents per gallon for the last 6 weeks. Americans spent over 26 billion dollars more just on gasoline during the first 9 months of the 2004 year, than was spent the year before, in the same period of time. According to Energy Department, this is a 16 percent increase.

The United States is the second world producer of gas after Russia. Almost 85 percent of the gas comes from domestic wells.

Main body

It is interesting, that some of the reasons for the gas price boost are uniquely American. So what are they? The problem is that in 2005, many of the numerous petroleum companies announced that they want to remove methyl tertiary-butyl or shortened MTBE from their gasoline. Companies are saying that such a decision was driven by State bans because of water contamination problems. So now they have to make a rapid change from methyl tertiary-butyl to ethanol, which will cost more money for a normal consumer.

The other reason is inflation. For the last couple of years, the dollar became weaker on the world markets. How can this affect gas prices? Gas is priced in dollars. Whenever the dollar is becoming cheaper, then other currencies are becoming stronger. So for example, if a gallon of gas costs 10 dollars and 8 euros, and the dollar becomes cheaper, then automatically euro will cost 10 percent more. So basically, you will need 7.2 euros to buy a gallon. As foreigners buy more gas, the demand is rising, and it automatically rises up the price in dollars. So in the US, it seems that the price is going up quite rapidly, while in other countries, mostly Europe and Asia the price is not going up that often or even stays the same. Also as people becoming more worried about inflation, they start to invest more money in oil, which is boosting up the demand and prices. So as a result we may state that inflation is indirectly affecting the gas price, by rising it up.

Conclusion

Another reason and I think the most important one, is that gas is naturally a non-renewable fossil. It is extracted from the ground for more than a century. For the last year drilling of natural gas increased by about 25 percent. The conservations of this fossil are slowly disappearing. And according to the law of business, the less amount of product can be provided – the more it will cost. According to this theory, gas prices will never go down, but instead, they will keep rising up every year.

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Why Gas Price Is Rising in the United States

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