# Why is Gasoline so damn expensive right now ($3.00 US, approx) **URL:** \ **Category:** Great Debates\ **Created:** [December 12, 2010, 5:22pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899 "2010-12-12T17:22:30Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![crypto](https://avatars.discourse-cdn.com/v4/letter/c/b3f665/32.png) [@crypto](https://boards.straightdope.com/u/crypto)\ **Post date:** [December 12, 2010, 5:22pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/1 "2010-12-12T17:22:30Z")
Before the second invasion of Iraq, gasoline in the US (depending on where you lived, cost of living, and state taxes, of course, hovered around $1 and $1.25, IIRC. When gas began to rise sharply in the US, to approximately $5 or so a gallon, things began to change quickly in the country. SUV sales plummeted, people began travelling less for leisure, and there was a genuine concern about the long-term implications of $5-$6 + for a gallon of gas. Gas prices then began to come back to earth a bit. Never to hit the pre-war pricing, but I remember it slipping below $2 a gallon, and things seemed to get better at the pump. Throughout this entire time, there was never a gasoline shortage that I can remember. Fuel was never being rationed, there were no even-odd days (old folks remember this from the 70’s), or any other major indications that oil was being withheld and/or rationed to the US. Cut to now, and where I live. Gasoline has been increasing in price slowly and steadily for the past 8 months or so and just broke through the $3 price point again. My question is why? Is this a simple matter of gas companies raising prices as far as they can so they can maximize their profits? I haven’t heard one complaint about gas prices this time around. It’s almost as if the first go around with gas prices was to prime us for this one. Whereas before, gas prices over $2.50 a gallon were hard to imagine, now, $2 is hard to imagine. A nice marketing trick, but not based in any sort of supply/demand philosophy I’ve ever studied. And since folks aren’t complaining to their congresspersons like they once were, it’s not at the top of anyone’s agenda to figure out why in the world gas is so damn high. I thought of the gulf accident by BP, but that has never been raised as a possible cause. As far as I know, no country is cutting production. There is no conspiracy by the oil producing countries of the world to stick it to us. In any event, I would think that for what we did for Kuwait in the early 90’s, they would fill up every oil tanker we could get there at a reasonable price. I think the US could also take as much oil as they wanted to from Iraq. Assuming this war is really for the people of Iraq, I would think they’d want to keep us there and happy. One of the ways to make us happy is cheap oil. Or hell. I’ll be cynical and throw out the idea that we take the oil and pay what we want for it (if at all). So, my question is… why has gas risen to over $3 a gallon, and 1) will it continue to rise or 2) will it ever fall? I know our former president Bush is invested heavily in oil, but I’m trying not to think that he can keep oil prices inflated while out of office. (current price of crude - $87.82 ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 12, 2010, 5:36pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/2 "2010-12-12T17:36:57Z")
How do you think the price of any product is set, and what do you think Congress has to do with the setting of prices in a market economy? I think you got it in your OP. Oil producers are trying to maximize their profits. Every company does that. I can’t say I know for sure what is causing the price of gas to be high, but it’s probably demand in China and the unwillingness of OPEC to increase production so that prices will fall. ---
**Author:** ![crypto](https://avatars.discourse-cdn.com/v4/letter/c/b3f665/32.png) [@crypto](https://boards.straightdope.com/u/crypto)\ **Post date:** [December 12, 2010, 6:37pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/3 "2010-12-12T18:37:59Z")
> [@John\_Mace](#): > > How do you think the price of any product is set, and what do you think Congress has to do with the setting of prices in a market economy? I think you got it in your OP. Oil producers are trying to maximize their profits. Every company does that. > > I can’t say I know for sure what is causing the price of gas to be high, but it’s probably demand in China and the unwillingness of OPEC to increase production so that prices will fall. **John Mace** , When I said that people aren’t complaining to their representatives in Washington, it’s in relation to the noise level that is produced when gas prices get out of hand. Congress can’t set prices, but when the noise level is increased, the talking heads begin to take up the cause because when the public is tuned into a topic, it’s good for ratings. Then questions begin to be asked on your Sunday morning political shows. Since that hasn’t happened this time, I’m curious as to why. With unemployment high and the economy in the crapper, gas over $3 should raise some eyebrows. I’ve not heard any debate over this current issue, which makes me wonder why. Are we (Americans) numb to it? Tired of complaining? Not paying attention? I understand the idea of the market economy. Crude oil is a commodity, and it is traded on the open market. Just like pork bellies and orange juice. Is it unreasonable for us to assume that the US could increase oil production in Iraq by putting pressure on them? What about Kuwait? I don’t see why that request would be out of bounds or off limits. Reducing the price of fuel would certainly help the economy, and the US could certainly use that help. As far as China is concerned, I thought they were still burning dirty coal at a massive rate, and fairly far away from becoming completely dependent on oil. In any event, even if you are correct about China, the US should be able to get what they need from Kuwait and Iraq. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [December 12, 2010, 6:41pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/4 "2010-12-12T18:41:11Z")
It’s a combination of _all_ commodity prices going up since those idyllic times of yesteryear and the falling of the value of the US dollar against other currencies. It has virtually _nothing_ to do with the oil producers raising prices beyond normal. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 12, 2010, 6:43pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/5 "2010-12-12T18:43:50Z")
I think what we’ve seen as that behaviors (in the US) don’t change wrt gas consumption until it gets to around $4/gal. I don’t think we have any clout to make members of OPEC act against their own interests. ---
**Author:** ![crypto](https://avatars.discourse-cdn.com/v4/letter/c/b3f665/32.png) [@crypto](https://boards.straightdope.com/u/crypto)\ **Post date:** [December 12, 2010, 6:44pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/6 "2010-12-12T18:44:16Z")
> [@samclem](#): > > It’s a combination of _all_ commodity prices going up since those idyllic times of yesteryear and the falling of the value of the US dollar against other currencies. > > It has virtually _nothing_ to do with the oil producers raising prices beyond normal. **samclem** , if the US dollar was still backed by gold, would that make any difference (I assume that would hold the value of the dollar against other currencies) ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [December 12, 2010, 7:05pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/7 "2010-12-12T19:05:30Z")
Well, yes, if we were still on the gold standard we wouldn’t be able to devalue our currency. Except what happens is that we maintain the value of our currency by selling gold. Once you run out of gold to sell, what next? In real life what happened is that governments suspended gold payments until the crisis was over. So in practice, governments acted so that gold standard currencies would have the same features as modern fiat currency, along with massive controls over the gold markets. As in, things like making it illegal for people to own gold bullion. At least with fiat currencies nobody is under any illusions, and citizens can buy and sell gold whenever and however they like. ---
**Author:** ![samclem](https://avatars.discourse-cdn.com/v4/letter/s/a9a28c/32.png) [@samclem](https://boards.straightdope.com/u/samclem)\ **Post date:** [December 12, 2010, 7:06pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/8 "2010-12-12T19:06:36Z")
> [@Stink Fish Pot](#): > > **samclem** , if the US dollar was still backed by gold, would that make any difference (I assume that would hold the value of the dollar against other currencies) Backing any currency against gold is just an exercise in a failed system. You’d see even wilder swings in prices as economies went from boom to bust. ---
**Author:** ![Try2B\_Comprehensive](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/try2b_comprehensive/32/65_2.png) [@Try2B\_Comprehensive](https://boards.straightdope.com/u/Try2B_Comprehensive)\ **Post date:** [December 12, 2010, 7:12pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/9 "2010-12-12T19:12:05Z")
I suspect it has to do with the [peak oil phenomenon](http://www.hubbertpeak.com/images/peakoilproduction2008.png). Simple supply and demand. The supply isn’t going up anymore, and while I could certainly be wrong, it looks like it can’t. Meanwhile, economies around the world want to continue to grow, and among other things that means burning more fuel. There isn’t enough for everybody, so the price rises. Wait until the projected 4%-9% annual decrease in global oil supply kicks in. Read up on the [1973 oil crisis](http://en.wikipedia.org/wiki/1973_oil_crisis). One interesting tidbit: > [@](#): > > The effects of the embargo were immediate. OPEC forced the oil companies to increase payments drastically. The price of oil quadrupled by 1974 Oil supplies were only restricted in the US by about 4-5%, and the price of oil quadrupled. I don’t think the effects this time will be so dramatic minus the geopolitical conspiracy aspect, but again, once the decline begins global oil supplies are projected to drop by 4-9% each and every year. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [December 12, 2010, 7:20pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/10 "2010-12-12T19:20:27Z")
Also, the reason you don’t see rationing and gas lines is because the price has been allowed to rise. It’s hard to imagine now, but back in the 70s the government regulated the price of gasoline. Of course, if keep the price of a good artificially low, shortages and other types of non-price rationing are inevitable. ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [December 12, 2010, 7:31pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/11 "2010-12-12T19:31:38Z")
[Here’s a graph](http://www.mongabay.com/images/commodities/charts/crude_oil.html) of oil prices. It appears they’ve simply returned to the level they had prior to the large spike and then huge slump prior to the Great Recession. Or in other words, when the Recessions over, people buy more oil. A more interesting question might be what the hell happened just before the Recession. Oil went up like 75% in the space of a few months. ---
**Author:** ![The\_Tao\_s\_Revenge](https://avatars.discourse-cdn.com/v4/letter/t/73ab20/32.png) [@The\_Tao\_s\_Revenge](https://boards.straightdope.com/u/The_Tao_s_Revenge)\ **Post date:** [December 12, 2010, 7:33pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/12 "2010-12-12T19:33:58Z")
> [@Simplicio](#): > > [Here’s a graph](http://www.mongabay.com/images/commodities/charts/crude_oil.html) of oil prices. It appears they’ve simply returned to the level they had prior to the large spike and then huge slump prior to the Great Recession. > > Or in other words, when the Recessions over, people buy more oil. A more interesting question might be what the hell happened just before the Recession. Oil went up like 75% in the space of a few months. IIRC it was an oil bubble. People expecting the price to rise so they bought oil futures which drove the price up for people who actually wanted oil, to you know, get to work so they can buy food and eat and stuff. Yea I’m still bitter about the selfish waste of flesh jackasses who did that. ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [December 12, 2010, 7:45pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/13 "2010-12-12T19:45:44Z")
> [@The\_Tao\_s\_Revenge](#): > > IIRC it was an oil bubble. People expecting the price to rise so they bought oil futures which drove the price up for people who actually wanted oil, to you know, get to work so they can buy food and eat and stuff. > > Yea I’m still bitter about the selfish waste of flesh jackasses who did that. Well, if it makes you feel better, it looks they would’ve lost something like 80% of their money when the Recession hit. I guess I don’t understand how bubbles like that can build though. Presumably the people buying the futures have the same data that went into that graph and could see the same crazy exponential slope. I don’t see how you could look at that and think anything except a) oil prices are in a bubble or b) Saudi Arabia has been nuked. And once you turn on CNN and verify b) is not the case, it seems pretty obvious that you should sell and get out of oil before everyone else does. There was a similar graph of housing prices floating around before the housing bubble burst and I had the same question. There’s no way the number of people looking for houses has trippled over four years, so you’d think it would be obvious to all involved that continiously bidding up housing was just going to bite them in the ass eventually. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [December 12, 2010, 7:51pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/14 "2010-12-12T19:51:46Z")
Between 2004-2007, [US petroleum consumption](http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_a.htm) stayed in a tight band between 20,680,000 and 20,802,000 barrels per day. Then it dropped to 19,498,000 bpd in 2008, and to 18,771,000 in 2009. ---
**Author:** ![The\_Tao\_s\_Revenge](https://avatars.discourse-cdn.com/v4/letter/t/73ab20/32.png) [@The\_Tao\_s\_Revenge](https://boards.straightdope.com/u/The_Tao_s_Revenge)\ **Post date:** [December 12, 2010, 7:54pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/15 "2010-12-12T19:54:50Z")
> [@Simplicio](#): > > Well, if it makes you feel better, it looks they would’ve lost something like 80% of their money when the Recession hit. > > I guess I don’t understand how bubbles like that can build though. Presumably the people buying the futures have the same data that went into that graph and could see the same crazy exponential slope. I don’t see how you could look at that and think anything except a) oil prices are in a bubble or b) Saudi Arabia has been nuked. And once you turn on CNN and verify b) is not the case, it seems pretty obvious that you should sell and get out of oil before everyone else does. > > There was a similar graph of housing prices floating around before the housing bubble burst and I had the same question. There’s no way the number of people looking for houses has trippled over four years, so you’d think it would be obvious to all involved that continiously bidding up housing was just going to bite them in the ass eventually. People are insane. A person can make logical, and smart choices, but get together and wow. My personal favorite bubble is [The Dutch Tulip Bubble](http://www.businessweek.com/2000/00_17/b3678084.htm) > [@](#): > > Bulb prices rose steadily throughout the 1630s, as ever more speculators wedged into the market. Weavers and farmers mortgaged whatever they could to raise cash to begin trading. In 1633, a farmhouse in Hoorn changed hands for three rare bulbs. By 1636 any tulip–even bulbs recently considered garbage–could be sold off, often for hundreds of guilders. A futures market for bulbs existed, and tulip traders could be found conducting their business in hundreds of Dutch taverns. Tulip mania reached its peak during the winter of 1636-37, when some bulbs were changing hands ten times in a day. The zenith came early that winter, at an auction to benefit seven orphans whose only asset was 70 fine tulips left by their father. One, a rare Violetten Admirael van Enkhuizen bulb that was about to split in two, sold for 5,200 guilders, the all-time record. All told, the flowers brought in nearly 53,000 guilders. > > Soon after, the tulip market crashed utterly, spectacularly. It began in Haarlem, at a routine bulb auction when, for the first time, the greater fool refused to show up and pay. Within days, the panic had spread across the country. Despite the efforts of traders to prop up demand, the market for tulips evaporated. Flowers that had commanded 5,000 guilders a few weeks before now fetched one-hundredth that amount. ---
**Author:** ![Simplicio](https://avatars.discourse-cdn.com/v4/letter/s/c37758/32.png) [@Simplicio](https://boards.straightdope.com/u/Simplicio)\ **Post date:** [December 12, 2010, 7:56pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/16 "2010-12-12T19:56:51Z")
> [@RTFirefly](#): > > Between 2004-2007, [US petroleum consumption](http://tonto.eia.doe.gov/dnav/pet/pet_cons_psup_dc_nus_mbblpd_a.htm) stayed in a tight band between 20,680,000 and 20,802,000 barrels per day. Then it dropped to 19,498,000 bpd in 2008, and to 18,771,000 in 2009. From [here](http://www.eia.doe.gov/emeu/steo/pub/contents.html) > [@](#): > > Projected world liquid fuels consumption increases by 2 million bbl/d in 2010, following declines in 2008 and 2009. As a result, total global consumption in 2010 should be close to the 2007 level. So yea, demand was depressed during the Recession and are now returning to previous levels, bringing prices back up with it. Sometimes economics works. ---
**Author:** ![DaveRaver](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/daveraver/32/1078_2.png) [@DaveRaver](https://boards.straightdope.com/u/DaveRaver)\ **Post date:** [December 12, 2010, 8:27pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/17 "2010-12-12T20:27:00Z")
These high gas prices have contributed more to the Great Recession than anyone seems to be admitting. The middle class has become desensitized much like a frog being slowly boiled to death without realizing it. People stopped writing to their senators and representatives because they proved to be ineffective. Unless the corruption ends, abuses will continue. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [December 12, 2010, 8:33pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/18 "2010-12-12T20:33:28Z")
How are high gas prices the result of corruption? Are you contending that if it wasn’t for corruption, gas prices would be much cheaper? Oil is a global commodity. It is bought and sold all over the world. And gas prices in the United States aren’t out of line with gas prices elsewhere. In fact, our gas prices are generally lower, because we have lower gas taxes than most developed countries. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [December 12, 2010, 8:40pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/19 "2010-12-12T20:40:01Z")
> [@DaveRaver](#): > > These high gas prices have contributed more to the Great Recession than anyone seems to be admitting. The middle class has become desensitized much like a frog being slowly boiled to death without realizing it. People stopped writing to their senators and representatives because they proved to be ineffective. Unless the corruption ends, abuses will continue. You know, that whole frog boiling to death slowly thing isn’t true. Sounds nice, but it just ain’t what actually happens. ---
**Author:** ![Gymnopithys](https://avatars.discourse-cdn.com/v4/letter/g/fbc32d/32.png) [@Gymnopithys](https://boards.straightdope.com/u/Gymnopithys)\ **Post date:** [December 12, 2010, 8:46pm UTC](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899/20 "2010-12-12T20:46:21Z")
Damn expensive ? It’s less than half we pay for in Europe. ($1.80 a liter = $7.20 a gallon) [Next page](https://boards.straightdope.com/t/why-is-gasoline-so-damn-expensive-right-now-3-00-us-approx/563899.md?page=2)