Friday, April 28, 2006

Q&A with NPR: "What's Behind High Gas Prices?"

My apologies if it seems like I'm dwelling on the gas prices issue too much, but I needed to put this up after having read the story. From NPR:
What factors are causing gas prices to rise so quickly?

The biggest factor in rising costs is the price of crude oil, followed by the cost of refining.
Then who sets the prices?

Oil companies don't set crude-oil prices; the global market does.
Is there any evidence that people are starting to change their habits in response to higher prices?

When you ask drivers at the gas station, "Are you trying to conserve?," they invariably say they are. But weekly data from the Energy Department show that we're still using more gasoline than we were a year ago.
Are there any short-term fixes?

The market solutions are: a) increase supply; and b) decrease demand.
What about long-term fixes?

They're the same: increase supply and decrease demand.
There's much more. Please read the whole thing. It's short, easy to follow, and does a fantastic job outlining why gas costs what it does and how the oil companies are making beaucoup bucks these days.

In short:

  • Supply and demand. Anyone with a cursory grasp of economics should know this, although like Kira said in a prior comment, maybe the schools should try teaching kids economics one day. You know, like Econ 101? The economics class probably shouldn't be like Colorado geography classes and bring up Bush-Hitler comparisons, though. But I digress.

  • Kira, Chrome Dome, and others are correct in that China, India, and other countries have stepped up their oil demand BIG time.

  • Refineries are still recovering from Bush's Kyoto-induced hurricanes last year. For those of you on the left, that was sarcasm...Bush didn't really produce the hurricanes!

  • In 1998, oil was $10 a barrel. If Big Oil companies can control or seriously influence the price of gas, there's no way in Hell they ever would have let oil get that low.

  • Notice the best short-term and long-term fixes are the same? Increase in supply and decrease in demand. Sure, there are more long-term fixes: build new refineries, find more oil fields, alternative fuels.