Its hard to believe but Americans were actually paying 90 cents a gallon in 1999. So how on earth could prices soar this high in such a short period of time. I am going to take a look at the course of action that brought us to were we are now.
1. Supply and Demand. A basic economic term we learned in highschool, did we learn from our mistakes though, no. Now I will admitt I only started driving about two years ago but Its not hard research. The more we use gas the less we have. As demand grew, the supply ran relatively flat starting the soar in prices. Maybe the cheap prices until 2004 was the downfall. Since prices were so cheap, we used and we used, not thinking twice about filling our S.U.V’s. Now we’ve created a lifestyle around gas consumption but the supply just cant keep up. Plus, we have other world powers buying gas as well and now we’ve dug ourselves into a deeper hole. “Our demand has skyrocketed, but our ability to supply that demand has stagnated,” said Stephen Schork, publisher of the industry newsletter The Schork Report. Oil from another part of the country just isnt enough to cover the demand. Prices roase to 2 dollars a gallon in 2004.
2. In 2005 Hurricane Katrina blows through and knocks out majority of U.S refiners causing another slip in supply. The price of gas hit an all time high of 3 dollars a gallon for the first time ever in U.S History. It proved the small capacity of Refineries in the U.S, plus since the last decade there have been no other refineries built since, although in all fairness even though this is my newsroom and I can say whatever I want, they have had many expansion projects on the remaining refineries after the storm. We never recovered.
3. In 2006 global events and conflict spike prices over 3 dollars a gallon. the Bush Administrations invasion of Iraq, global dictators who threaten to restrict supply if attacked request more profits, ex. Hugo Chavez and Vladimir Putin. Tempers are hot and oil prices spike. Oil is so globally traded that when countries begin conflict, business between them tends to go array, hence all the global conflict today and the highest prices ever.
4. 2007 rolls around and there are talk of non-OPEC (organization of petrolium exporting countries) supplies coming in to ease demand, but conflict in Russia and Kazakhstan, plus the sweeping ban of drilling in the United States doubles oil consumption. Analysts say OPEC, which holds two-thirds of the world’s oil reserves but sees a global economy scimming along despite $130 oil, has little incentive to increase production.
5. Investors, the last cause that made prices sky rocket. These investors saws the flaw in the market and seized upon the opportunity. Analyst are saying since 2003, the number of oil contracts exchanged on the NYMEX has more than doubled. Investors are looking for good returns and are stopping at nothing, even if it means speculating the price till it rises above 4$ a galling were it is at today. Some say these investors did not contribute and the market is where it should be at. I agree, the problem starting when we based our economy on a energy that can and will eventually run out.
Prices were cheap, we all created habits, now were stuck in this rut and w
ere trying to figure a way to break the habit. Had we known this might happen just a few years prior we could have prepared before we were spending hundreds at the pump. For now we need to budget out money and buy veggie cars, that way we screw the companies that put us in this mess. Plus we would have to start eating more vegetables and would would be healthier too, I love when I come up with Ideas like this.
