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What causes gas prices to rise and fall?

Kevin Sutter

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Jeffrey Rodriguez on March 14, 2019

It all starts with the oil, many of which (at least for the united States of America) comes from the OPEC nations. The crude oil is converted into gasoline. The oil is the primary source of the car and the airplane fuel, and the heating of the house, just to name a few. The oil is also a great part of manufacturing of plastics. All of these uses for oil limit the supply that can be used at any time, which leads to the first cause: the Supply and Demand As with almost everything, the price of goods is based on the demand of the public for the same goods. In the case of oil, the more we drive our cars and trucks, fly planes, the amount of time we spend each day with the warmth of our homes, and the number of products made from, or packaged with plastic affect the amount of oil of cost. The more we use, the more it costs. The less we use, the cheaper it can be. That old problem, when you want it, you have to pay more for it. When you do not want, is very cheap. It is all about value . The oil is more valuable during certain times. When the summer rolls around, school is out for 2-3 months, the families want to go on holiday, and that's going to require fuel. Local gas stations, OPEC, and/or oil companies raise their prices to get the maximum benefit of consumers within this short period of time. More often than not, you will notice a drop in gas prices shortly after classes resume for the new school year as demand for gas decreases. There are times when the supply of gas/oil is reduced for other reasons that are of high consumption. An example of this would be during and after a natural disaster such as a hurricane. The united States has many oil refineries in the Gulf Coast region, a region susceptible to hurricanes and tornadoes in any given year. These disasters not only economically) effect of states that are affected by them, but the country as a whole. Oil refineries may be damaged during a disaster situation, the equipment can be destroyed, and even the means of transport the gasoline across the country, including roads, may be damaged or blocked in any way as to limit and/or decrease the supply of gasoline. The same can be said, although to a lesser extent, unless on a large scale, for man made disasters such as the oil spill in the Gulf of Mexico in 2010. The war, As has been mentioned, conflict and war in oil-producing nations can cause a dramatic change in the price of gasoline. Since these nations are the ones that provide the oil, when a conflict rages, can, and, affect the supply of oil, as not as much, if any, the oil will be able to flow from the nation to the rest of the world until the end of the conflict. The oil of the Speculation, the less discussed, but still a large part of the rise and fall of oil prices is the involvement of oil speculators. These are people who invest their money in the oil through futures contracts. A futures contract is an agreement between two parties on the trading floor of a futures exchange for commodities (such as oil, gold, etc) at a fixed price in the future. Speculators or investors, some say, have a vested interest in keeping the supply low so that they can make more money in the future of your investment. They play a role in the restriction of the amount of oil flowing into the market, limiting supply and growing demand, thus making more money from high prices, while the consumer pays much more than many can afford.


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