Increasing Oil and Gasoline Prices

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We the American people have seen rising oil and gasoline prices continuously over the last few decades. Each year is slightly higher than the last. However, we have seen a few instances where oil and gasoline prices have spiked rapidly enough to invoke the American public to stop spending or cut back. The first time in recent history was after the hurricanes Katrina and Rita in 2005. Then, in July 2008 we saw a massive jump to the current record high national average of $4.50 per gallon of gasoline. Oil at this time was over $115 per barrel of light sweet crude which is the oil that American’s use in their gasoline. Currently the US oil and gasoline prices continue to increase. In the last month gasoline alone has risen almost 17 cents a gallon that’s slightly over a 5% increase (source). Compare the increase in the last month to the average yearly increase of %14 or roughly 39 cents per gallon (source). This leads to a particular, why is the price of oil and gasoline increasing at such a rapid rate? Three possible reasons for this could be: the unrest in the Middle East, speculation and risky trading on futures, or a simple difference in supply and demand.

The unrest in the Middle East would be a valid disruption in normality of prices if the Middle East were exporting less oil than it did before the many revolutions. However, Saudi Arabia has said it will make up the difference in the supply if the supply were to drop of significantly (source). Other members of the Organization of the Petroleum Exporting Countries (OPEC) have vowed to “do more” if the region continues to become destabilized. Libya for example only accounts for 2% of the world’s resource of oil (source). Libya’s oil is special only because it contains 0% to .5...

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