Why gas costs $$

 The price of gas hit a new high point for 2009 last week. 

According to the Department of Energy, the price is up nearly 30 cents from this time last year. 

This is an outrage. It is November, and it is no secret that gas is supposed to be getting cheaper as we get further from summer in the calendar year. 

 

Gas prices are maxing out because last month, the price of crude oil rose about $10 per barrel in just two weeks, causing it to reach its peak for 2009. 

 

The fluctuations in crude oil prices usually take a couple of weeks to affect the consumer’s wallet at the pump. 

The price of crude oil is based on the total amount of world barrel production. The higher the production rate, the cheaper the cost. The other major factor of pricing crude oil is transportation costs: 

The oil must be transported very carefully to avoid any spills or accidents. Therefore the closer the oil is to home, the cheaper the cost will be to transport it, and in turn the cheaper it will be at the pump. 

 

The increased price of crude oil certainly explains why we are paying so much for gas at the moment, but it does not tell us why crude oil prices fluctuate so much. Some people think that it is the Organization of the Petroleum Exporting Countries (OPEC) charging us whatever they want because they are greedy, money-hungry monsters. 

However, this statement may have been truer in the past than it is today.

In 1973, the Yom Kippur War began as an attack by Egypt and Syria on Israel. The war only lasted six days, but the effects would be felt for years to come. 

 

The Arab Oil Embargo was imposed on countries that supported Israel during this time (the U.S. included), which resulted in a 400 percent price increase on barrels of oil. 

 

The price remained relatively stable for the next decade and was the cause of the high gas prices and the global recession of the late 1970s. 

This proved to the world just how much control OPEC had over the price of crude oil: All they have to do is slow production rates and the price skyrockets. 

 

Consequently, the rest of the world began exploring new methods to reduce the dependence on crude oil. The global dependence was decreased by new technology, such as improved insulation in homes and cars that could achieve higher miles per gallon, and by non-OPEC oil-producing nations increasing their production rates. 

In addition, recent discoveries of large deposits of oil in places such as Alaska, the North Sea, Canada, and the Gulf of Mexico have helped to diminish OPEC’s power to control the crude oil price. 

 

Today OPEC still controls about 66 percent of the world’s oil reserves, so when they decrease production we can still feel the economic damages here at home, though not quite as much as we did in the past. 

 

The best way to reduce oil dependence is alternative energy, but until then here’s to hoping we can discover more oil deposits and decrease OPEC’s power over the crude oil market along with its percentage of oil reserves. 

It is said that knowing is half the battle. If that is so, why does my wallet still hurt so much whenever I fill up?