# Why are gas prices so high? **URL:** \ **Category:** Factual Questions\ **Created:** [March 8, 2003, 6:25pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941 "2003-03-08T18:25:11Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Vortex](https://avatars.discourse-cdn.com/v4/letter/v/fbc32d/32.png) [@Vortex](https://boards.straightdope.com/u/Vortex)\ **Post date:** [March 8, 2003, 6:25pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/1 "2003-03-08T18:25:11Z")
Gas prices in CA have reached over $2 per gallon for self serve 87 octane–I’m wondering why. I have a minor in economics so I do have a few theories. Please critique. 1. Some states require oxygenation this time of year. Obviously, that increases the cost of production, and this cost is passed along to the consumer. 2. I’ve heard that some of the refineries are not operating, or are not operating at full capacity, for whatever reason. This is constricting supply. 3. Most importantly, I’m wondering if OPEC is reducing the supply of oil, causing gas prices to soar. If so, why? Is it an act of retaliation for the upcoming war in the Middle East? Side question: some stations in Arizona have been experiencing “shortages.” Doesn’t economic theory tell us that shortages usually only occur when the government imposes a price ceiling, as it did in the 1970s? Without this ceiling, the price should simply rise in order to ration the available supply. So, what gives? ---
**Author:** ![Fuel](https://avatars.discourse-cdn.com/v4/letter/f/df705f/32.png) [@Fuel](https://boards.straightdope.com/u/Fuel)\ **Post date:** [March 8, 2003, 6:37pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/2 "2003-03-08T18:37:02Z")
Additional question about #3: What percentage of the oil that U.S. buys/imports is from OPEC? ---
**Author:** ![NajaNivea](https://avatars.discourse-cdn.com/v4/letter/n/22d042/32.png) [@NajaNivea](https://boards.straightdope.com/u/NajaNivea)\ **Post date:** [March 8, 2003, 7:02pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/3 "2003-03-08T19:02:35Z")
I was wondering the same thing–I’m in Northern California, and the cheapest gas available in my city at the moment is $2.07/gallon, ranging up to $2.22 at some stations.\* The only explanation I’ve heard is that prices are going up due to uncertainty about future supplies, what with the pending war in Iraq and all, but this seems specious at best. Peace, ~mixie This is me, kicking myself in the head for refusing to tank up a week ago at $1.93–“it can’t possibly go any higher than that” sez I. ---
**Author:** ![Ringo](https://avatars.discourse-cdn.com/v4/letter/r/779978/32.png) [@Ringo](https://boards.straightdope.com/u/Ringo)\ **Post date:** [March 8, 2003, 7:23pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/4 "2003-03-08T19:23:51Z")
From the Energy Information Administration’s [Short-Term Energy Outlook – March 2003](http://www.eia.doe.gov/emeu/steo/pub/contents.html) page: > [@](#): > > **World Oil Markets.** February crude oil prices moved higher than expected pushed by fears of a war in Iraq, low inventories, slow recovery in Venezuelan exports, continued cold weather and sharply higher natural gas prices in the United States. West Texas Intermediate prices averaged close to $36 for the month ([Figure 1](http://www.eia.doe.gov/emeu/steo/pub/gifs/img002.gif)), a level not seen since October 1990. Oil inventories continued lower through the month resulting in a cumulative reduction in total commercial stocks of 101 million barrels since September 30, 2002, the beginning of the heating season. Total OECD inventories reached an estimated 2,424 million barrels at the end of February, which would be the lowest level since March 2000. The current situation reinforces our view that, even without additional disruptions to world supply in the near term, prices are likely to remain on the high side and subject to substantial volatility through 2003 because of the abnormally high stock build rates that would be required to bring about the kind of oil market balance that is consistent with WTI prices well below $30 per barrel. I’m going off the top of my head here, so figures may be slightly outdated. We consume ~18-19 MMBOPD of which, in recent history, ~55% has been imported. Middle East oil has been around 15-20% of the total. OPEC includes, of course, Venezuela, who can not presently deliver. That’s part of it. Domestic drilling has only recently started to pick up, and only by a little bit. The rig utilization rates for most of last year were static, in the mid to low 800s. It was ~928 a week ago, and I didn’t catch yesterday’s rig report. In 2000-2001, North American rig rates were 1100-1200, and in 1981 we had 4500 rigs working at one point. Product prices have been up for several months, but activity has failed to commensurately climb. The general feeling in my part of the oilpatch is that this is due, largely, to 1.) a lack of investor confidence (i.e., the requisite money dosen’t believe prices will remain strong, and based on the increasing frequency of price swings, there may be some merit to that perception) and 2.) an absence of investor funds, due to the pummelling many have taken with both the [dot.com](http://dot.com) collapse and the corporate imaginary economy scandals of late. In another thread in the last week or so, I did go through the exercise of comparing gasoliine prices from 20 years ago to now. IIRC, the average price of a gallon of gas then was $1.28, and that would be $2.40 in today’s dollars. So, even though supply is tightening in the present context, which is _why_ prices have risen recently, a gallon of gasoline still isn’t relatively any more expensive than other consumer goods. ---
**Author:** ![Ringo](https://avatars.discourse-cdn.com/v4/letter/r/779978/32.png) [@Ringo](https://boards.straightdope.com/u/Ringo)\ **Post date:** [March 8, 2003, 7:29pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/5 "2003-03-08T19:29:03Z")
I should add that efforts to build natural gas reserves are what drives domestic drilling efforts. Natural gas prices spiked to $9+ last week (from $5+), and have since settled to 7+. Natural gas in storage is at historically very low levels. We import natural gas from Canada and Mexico only. Be prepared for your gas bills to climb. ---
**Author:** ![ChalkPit](https://avatars.discourse-cdn.com/v4/letter/c/a88e4f/32.png) [@ChalkPit](https://boards.straightdope.com/u/ChalkPit)\ **Post date:** [March 8, 2003, 7:46pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/6 "2003-03-08T19:46:15Z")
$2 per gallon - you call that high ? Oh you poor thing ! Lol…you guys don’t know how good u have it - or maybe u do ? Prices here in the UK are about £3.50 per gallon (about $5.50). Even allowing for your gallon being smaller, that’s still way over twice as expensive. About 75% of the cost of our fuel is in taxes I believe. I get the impression that the US would come to a grinding halt if your fuel was similarly taxed. ---
**Author:** ![NajaNivea](https://avatars.discourse-cdn.com/v4/letter/n/22d042/32.png) [@NajaNivea](https://boards.straightdope.com/u/NajaNivea)\ **Post date:** [March 8, 2003, 8:08pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/7 "2003-03-08T20:08:49Z")
> [@](#): > > \*Originally posted by ChalkPit \* > \*\*$2 per gallon - you call that high ? > > Oh you poor thing ! > > Lol…you guys don’t know how good u have it - or maybe u do ? > \*\* Hey, thanks for the patronization, I appreciate you plucky Brits keeping up the good fight. I’m well aware of what gas prices over there are, and yes, $2 per gallon _is_ abnormally high here. What’s your point? Just because something’s crappy elsewhere doesn’t mean I should be happy that it’s relatively less crappy here, even as it continues to grow crappier. Our bus system is decentish, and I’m told we have the most bikes in use per capita of any city in the US, so it’s not as though most people here are driving when they could be getting around in other ways. High gas prices still suck. ~mixie ---
**Author:** ![I\_Brian](https://avatars.discourse-cdn.com/v4/letter/i/c89c15/32.png) [@I\_Brian](https://boards.straightdope.com/u/I_Brian)\ **Post date:** [March 8, 2003, 8:16pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/8 "2003-03-08T20:16:13Z")
I guess the point is to enjoy what you’ve got! Yeah, I’m a Brit, too, and have the petrol receipts to prove it! And, yes, it’s the recent rise in crude oil that caused the hike. ---
**Author:** ![mangeorge](https://avatars.discourse-cdn.com/v4/letter/m/d78d45/32.png) [@mangeorge](https://boards.straightdope.com/u/mangeorge)\ **Post date:** [March 8, 2003, 8:26pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/9 "2003-03-08T20:26:38Z")
All of that about crude, etc, plus the fact that we’ll _pay_ these prices. Whatever the market will bear, right? Peace, mangeorge ---
**Author:** ![Ringo](https://avatars.discourse-cdn.com/v4/letter/r/779978/32.png) [@Ringo](https://boards.straightdope.com/u/Ringo)\ **Post date:** [March 8, 2003, 9:01pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/10 "2003-03-08T21:01:16Z")
That’s the way it is, pal. Some things remain the same. ---
**Author:** ![NajaNivea](https://avatars.discourse-cdn.com/v4/letter/n/22d042/32.png) [@NajaNivea](https://boards.straightdope.com/u/NajaNivea)\ **Post date:** [March 8, 2003, 10:56pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/11 "2003-03-08T22:56:36Z")
> [@](#): > > \*Originally posted by I, Brian \* > \*\* Yeah, I’m a Brit, too, and have the petrol receipts to prove it! > \*\* Heh. I didn’t mean that to sound as snarky as it came out to be, but the point remains. Also, _your_ insane prices are mostly in tax, yes? So at least ostensibly, you’re _getting_ something for your five fitty. We just get less gas. Peace, ~mixie ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 8, 2003, 11:53pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/12 "2003-03-08T23:53:38Z")
[This article](http://www.delawareonline.com/newsjournal/local/2003/03/08oilsperfectstor.html) a convergence of factors the combined to form the “perfect storm” of gas prices: > [@](#): > > \*\*• A general strike in Venezuela dramatically decreased crude-oil production. In 2002, Venezuela exported 1.19 million barrels of crude oil a day to the United States, or 13 percent of the country’s total daily crude-oil imports, Costello said. While the general strike has ended, the recovery has been slow, he said. > > • OPEC cut production in 2001, resulting in excess oil being used up through 2002. > > • A cold winter in the Northeast has resulted in greater demand for heating oil, meaning refineries produce more heating oil at the expense of gasoline. Gasoline inventories at the end of February were about 5.6 percent below last year’s levels, Costello said. > > • Prices in the natural-gas market have risen because of the cold weather and low storage levels, Costello said. Oil prices also have a tendency to rise with the natural-gas market. > > • Worries of a war with Iraq have driven up prices, although industry experts say it’s difficult to quantify. > > \*\* ---
**Author:** ![handy](https://avatars.discourse-cdn.com/v4/letter/h/b5a626/32.png) [@handy](https://boards.straightdope.com/u/handy)\ **Post date:** [March 9, 2003, 12:42am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/13 "2003-03-09T00:42:47Z")
“Gas prices in CA have reached over $2 per gallon” Cool? I want some. Im in Calif too, right next door its $2.40 for premium self serve. ---
**Author:** ![mangeorge](https://avatars.discourse-cdn.com/v4/letter/m/d78d45/32.png) [@mangeorge](https://boards.straightdope.com/u/mangeorge)\ **Post date:** [March 9, 2003, 12:49am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/14 "2003-03-09T00:49:05Z")
Prices vary widely by region. Some of the highest prices are in areas in very close proximity to refineries. That should tell us something about the reasons for higher prices. ---
**Author:** ![NajaNivea](https://avatars.discourse-cdn.com/v4/letter/n/22d042/32.png) [@NajaNivea](https://boards.straightdope.com/u/NajaNivea)\ **Post date:** [March 9, 2003, 12:54am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/15 "2003-03-09T00:54:14Z")
> [@](#): > > \*Originally posted by handy \* > \*\*“Gas prices in CA have reached over $2 per gallon” > > Cool? I want some. Im in Calif too, right next door its $2.40 for premium self serve. \*\* Yeah, on my way to work this morning, I noticed the station down the street from me was priced at $2.22, $2.32, and $2.42 for the three grades, respectively. Blech. ~mixie ---
**Author:** ![Flying\_Monk](https://avatars.discourse-cdn.com/v4/letter/f/48db29/32.png) [@Flying\_Monk](https://boards.straightdope.com/u/Flying_Monk)\ **Post date:** [March 9, 2003, 2:36am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/16 "2003-03-09T02:36:49Z")
“A general strike in Venezuela” Yeah, right… It’s only going to get worse…our oil consumption is increasing at an exponential rate, and oil deposit discoveries are shriveling. Not to mention the steadily advancing effects on the environment, which will only increase gas prices in the form of taxes. They’d better get this “hydrogen economy” thing running on schedule… “A criminal is a person with predatory instincts without sufficient capital to form a corporation.” - Howard Scott ---
**Author:** ![Crafter\_Man](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/crafter_man/32/458_2.png) [@Crafter\_Man](https://boards.straightdope.com/u/Crafter_Man)\ **Post date:** [March 9, 2003, 2:44am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/17 "2003-03-09T02:44:56Z")
The price of gasoline is determined by supply and demand. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 9, 2003, 2:48am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/18 "2003-03-09T02:48:44Z")
> [@](#): > > \*Originally posted by Flying\_Monk \* > \*\*“A general strike in Venezuela” > > Yeah, right… > \*\* I’m not sure what you mean by this. Are you saying there was not a general strike in Venezuela that curtailed production for months? Or are you saying that is would have no real effect, even though 13% of our imported oil comes from Venezuela? Neither strikes me a very informed. ---
**Author:** ![capnfutile](https://avatars.discourse-cdn.com/v4/letter/c/e0b2c6/32.png) [@capnfutile](https://boards.straightdope.com/u/capnfutile)\ **Post date:** [March 9, 2003, 8:00am UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/19 "2003-03-09T08:00:42Z")
> [@](#): > > \*Originally posted by Flying\_Monk \* > \*\*“A general strike in Venezuela” > They’d better get this “hydrogen economy” thing running on schedule… > \*\* I hope this was tongue in cheek. Hydrogen may nearly cover the planet, but getting it away from its dear pal hydrogen takes heaps of energy. Which usually comes from burning coal/splitting atoms/flooding indigenous people off their land. The modern internal combustion engine is the most efficient and non-polluting way of powering a car known to man, especially in hybrids like Honda’s. Problem is, with heavier cars (you know the kind) all the rage, cars on average are getting the same mileage as they did twenty years ago! Gasoline is still cheaper than bottled water, and we ought to be consuming more of the latter than the former. But yeah, I agree, we are buggered. capn ---
**Author:** ![galen](https://avatars.discourse-cdn.com/v4/letter/g/ecc23a/32.png) [@galen](https://boards.straightdope.com/u/galen)\ **Post date:** [March 9, 2003, 3:47pm UTC](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941/20 "2003-03-09T15:47:32Z")
Hijack The “general strike” in Venezuela was more more of a lockout than a strike. [Next page](https://boards.straightdope.com/t/why-are-gas-prices-so-high/159941.md?page=2)