Reasons For High Gas Prices

6 Pages 1503 Words

In recent months we have seen a rise in gasoline prices at the pumps and we all are wondering why. Part of the reason is the price of crude oil on the stock market; this can cause prices to jump up or down based on market price. The other reason that prices go up is the classic example of supply and demand. When the demand for something goes up, theoretically the supply will go up and keep prices low. When the demand for something goes up and the supply cannot increase with the demand, the price goes up. This is of course how a free market operates and the supply and demand of products can lead to wild price changes on the stock market, much like the oil prices we are seeing on the market right now.
In this research paper I will look closely at the supply and demand for gasoline. I will look at the output of fuel from all of our refineries in the United States (U.S.); I will look at the supply of crude oil, as well as the demand for fuel in the U.S. I will also touch on a few other reasons for high gas prices, mainly government regulations and pollution control additives that are added to gasoline in certain heavily populated areas and determine if that has a price impact at the pump. With this data I hope to conclude that we simply do not have the refinery capacity in the U.S. to keep up with the demand for fuel and that is part of the reason for the high gas prices.

Production of Crude Oil
First let us look at the production of crude oil in the U.S. According to the web site www.eia.doe.gov using table 5.9 Refinery Capacity and Utilization, 1949-2003, I was able to determine that in 1949 the U.S. had 336 operable refineries with a capacity of 6,231 barrels a day (b/d), 5,556 b/d distillation units with a utilization percent of 89.2. Loosely translated that means in 1949 the U.S. had 336 operable refineries producing about 5,556 barrels a day of fuel and operating at 89.2 % capacity. The number of operable refineries slowly droppe...