Why Are Gas Prices So High?

Why are gas prices so high? This is a question we’ve all been asking recently. Somebody is making a tremendous profit at our expense, and we all want to know who it is. The truth is, there are a handful of reasons that gas prices have risen to astronomical heights. Here, will try to outline the most important reasons, in order to help you better understand why the prices are what they are. Of course, this won’t make it any easier to swallow, but what at least we will have a little bit of insight into the economy.

The first thing we should understand is that 71% of what we pay at the pump is actually due to the barrel cost of crude oil. What about the other 29%? Well, the other 29% consists of the cumulative total cost of taxes, distribution, marketing, and refining costs. All of these numbers can fluctuate frequently, though the barrel cost is the predominant thing that causes gas prices to rise.

However, there are other factors that can really make a serious increase in at-the-pump cost of fuel. One of the biggest problems we face is the declining value of the US dollar. You over year the US dollar has become weaker and weaker for the last several decades. Oil is traded in dollars. Other countries currencies are currently getting stronger and stronger against the US dollar. They are exploiting this, and purchasing oil shares. Of course, this is the only logical thing to do. You would probably be doing the same thing in their shoes. What this amounts to, is that it’s cheaper for them to purchase oil than it is for us to purchase that same oil. Foreign investors are investing more and more in oil, and their speculation is driving the costs of crude oil upward, which in turn results in higher at-the-pump prices for us.

Perhaps the biggest problem with these rising oil costs, and the decline of US dollar, is that it is in fact hurting the American economy. People are taking fewer and fewer vacations, and spending less and less money. When people spend less and less money, the economy takes a hit. This damages the US economy, and is fueling fears of an extended recession. This, just as we were thinking the recession was over.

If we want to be really honest about this, we have to realize that the United States government is in fact adding tariffs and taxes to the cost of our gasoline. In other words, it isn’t like the government can’t do anything to fix the gasoline prices. They simply choose not to. Case in point: when was last time you saw a gas station owner who was rich, let alone well off? Probably never. So, who’s making all the money? Number one, the oil companies. Number two, the investors. And, last but far from least, our government.

One terrifically important factor in the cost of crude oil is turmoil in other countries. Specifically, oil-producing nations. Right now, Libya is in a state of turmoil, which is increasing the cost of oil coming from the Middle East. This is because turmoil in Middle Eastern nations causes a fear that oil supply will not be will to keep up with demand, thus driving the cost of oil upward. This turmoil and Middle Eastern countries is not isolated. It is in fact, influenced very heavily by the actions of NATO countries. For this reason, it’s very important that we take an active role in shaping our foreign-policy. The bottom line is, our foreign policy affects the things other countries do, and therefore affects the world economy. This, at the end of the day, affects what we pay for gasoline, and therefore our economy.

Here’s another tricky thing to understand. Oil is traded on the global market, right? So, oil should also cost roughly the same amount worldwide. Why then, do we seem to pay a fluctuating amount for the same thing? Well, this goes back to our previous point of the declining American dollar. When our dollar is worth less and less every year, we pay more and more for gas every year. This is common sense. When your money is worth less, it takes more of that money to buy stuff. For this reason, things like groceries also tend to increase in price over time, due to our declining dollar.

Why is the dollar declining? Good question. To make a very long story incredibly short, the Federal Reserve system is at fault. This is why recent bills have been authored that call for an audit of the Federal Reserve system. They are a private organization that controls our economy more than any other single organization in the world. And, to top it off, they do not disclose their inner operations to the American people. Anytime you have people who are not accountable for their actions that do things that are wrong. This is a basic moral principle of life, and one that everyone needs to understand. The bottom line is, we need more transparency in government, and we need it now. Let’s just hope this happens before the recession gets any worse.

So, what we take from this? Well, we know that we need more transparency in government, for one. Secondly, our foreign policy really needs work. Thirdly, we really need to audit the Federal Reserve system, so that we know what this organization has been up to for the last several decades. When we do this, we can begin to understand and control our own economy. Until then, we are at the mercy of people in positions of power where they are not accountable to anyone. This will never amount to anything good, and it needs to be changed, and fast.