Rising Gas Prices

1158 WordsApr 4, 20125 Pages
No Room Equals Big Bucks There are many different elements that contribute to rising gasoline prices. The major cause for increasing gasoline prices has to do with refining capacity. Even if oil were inexpensive, we would still have a problem converting it into the gas that fuels our economy. That is what keeps the gas prices high. When gas supplies are short, due to an “inability to refine crude oil into gas efficiently,” prices increase. This is a component of supply and demand economics. In a positive aspect, rising gasoline prices do serve a purpose; they curtail usage so that we do not eventually run out of fuel. If gasoline continued to retain its cheap price, despite how much was available, people may pull up to…show more content…
It’s like pouring oil into a funnel; a fixed amount will come out the skinny tube no matter how much oil one pours into the wide opening. Rosenberg presented a puzzling question on this matter: “Why was the national average for a gallon of gasoline in 2007 $3.25 when a barrel of oil cost $60 and now that oil is $100 a barrel the price for a gallon of gasoline is $2.80?” (Para 2, Rosenberg). The answer is consolidation. Consolidation is when two or more companies or corporations merge together. Consolidation in the refining industry has limited America’s refining capabilities. The three biggest American oil companies ExxonMobile, ConocoPhillips, and ChevronTexaco were once six individual companies. There was a time when the oil industry was not making an astronomical amount of profit, like they do now. When they merged, they also bought out some of the smaller refiners. The top refiners now control more than half of the refining capacity in the United States. Unfortunately, this has allowed the big oil refiners to tightly control gasoline reserves, thus greatly affecting availability and prices. Without a competitive market the consumer will continue to suffer because there is no incentive for big oil refiners to increase refining capacity when there is a shortage. Spending millions to construct new refineries to produce gasoline faster will only lower their profit margins. Big oil companies made multi-billion dollar profits in 2005 with
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