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Oil and Gas Prices

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Oil and Gas Prices
Darlene Dant
COM 150

In August 2006 the American national average for a gallon of gas was $3.09. Gas prices hit an all time high in July 2008 with a national average of $4.12 per gallon. By December 2008 the national average for a gallon of gas was a mere $1.61 (GasBuddy, 2009). Due to the affect that supply and demand has in combination with state and federal taxes, America has seen significant fluctuations in gas prices. As people say, “What goes up must come down” and, in the oil and gas industry the opposite is also true, “What goes down must come up”. Fuel costs are affected by the world’s oil supply. The Organization of the Petroleum Exporting Countries (OPEC) consists of 12 members from various countries, who are the main suppliers of the world’s oil (OPEC, 2009). According to the Energy Information Administration (EIA [2009]), America gets the majority of its oil from five countries: Canada, Venezuela, Mexico, and Saudi Arabia. There are different grades, or qualities, of crude oil. Two of the most popular grades are: light-sweet crude oil (better grade) and heavy-sour crude oil (lesser grade). Depending on where the oil is coming from, it may be of a better, or lesser, grade compared to that of another country. The most desirable crude oil is light-sweet crude oil. While easily obtained in the past, light-sweet crude oil is becoming less available, causing an increase in price (Wagner, 2008). While light-sweet crude oil may have a higher price than its counterpart, heavy-sour crude oil, it is more cost-effective to refine into gas. Light-sweet crude oil contains lesser impurities and has a more time efficient refining process than the heavy-sour crude oil. While heavy-sour crude oil costs less than the light-sweet crude oil, it has more impurities than the light-sweet crude oil. Heavy-sour crude oil takes…...

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