Gas prices are rising again and it has people wondering. Why are gas prices going up? And how high will gas prices rise this time? In California, Los Angeles is already hit with $5 gallon gas. San Diego County’s average gas price has reached $4.055 per gallon reports 10News on Feb. 6, 2013.
According to San Diego’s 10News, gas prices are rising because of “high oil prices, Middle East tension, California refinery maintenance issues resulting in reduced supplies, and investors shifting their money into the gasoline market ‘earlier and earlier,’ according to Jeffrey Spring of the Automobile Club of Southern California.”
A CNNMoney report on Feb.6, 2013, appears to agree with most of the above reasons as to why gas prices are rising.
“Analysts say gas prices are going up for two basic reasons: oil prices are rising, and refineries are shutting down.”
In regard to oil prices, four major factors influence the cost of one gallon of gas; the price of crude oil (68%), refining costs (8%), marketing and distribution (11%), and taxes (13%).
The price of crude oil is not set as much by supply and demand but by OPEC (Organization of the Petroleum Exporting Countries which is an intergovernmental organization of twelve oil-producing countries made up of Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela; OPEC has had its headquarters in Vienna since 1965) and by oil traders in New York, London, and Dubai.
“OPEC production cuts are also causing oil prices to rise. The cartel is believed to have cut production by about 1 million barrels a day over the last few months, partly as a response to rising oil production elsewhere, notably the United Sates.”
Oil refineries process crude oil into useful products such as petroleum naphtha, gasoline, diesel fuel, asphalt base, heating oil, kerosene, and liquefied petroleum gas. Most refineries are owned by big companies like BP, Chevron, Royal Dutch Shell, Phillips, Paramount Petroleum ExxonMobil, Suncor Energy, and other big-profit companies.
“Profit margins for oil refiners have been at record highs. In 1999, for every gallon of gasoline refined from crude oil, U.S. oil refiners made a profit of 22.8 cents. By 2004, the profits jumped 80% to 40.8 cents per gallon of gasoline refined. Between 2001 and mid-2005, the combined profits for the biggest five refiners was $228 billion,” wrote Public Citizen.
So are refineries really “losing” money by dealing with refinery maintenance issues and switching from winter gasoline to summer gasoline?
Maybe instead of saying that gas prices are rising because of the price of crude oil, refining costs, marketing and distribution, and taxes, it might be easier to say that gas prices are rising because oil producers, investors, oil companies, governments (taxes), and oil distributors can make more money for each gallon of gas.
In its Feb. 6, 2013, report, CNNMoney writes that,
“Energy analysts say oil prices are rising partly because the economy is improving. The U.S. housing market had its best year in the last five, U.S. job growth is steady, and the Chinese economy is showing an uptick.”
As long as consumers are willing to pay for higher gas prices, there is no reason for those who make a profit to stand in the way. If San Diego and Los Angeles are any indication, gas prices not only in California but around the country will continue to rise and even go beyond $5 per gallon of gas unless and until consumers take action.
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