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Rising Cost of Gas Prices

In: Business and Management

Submitted By mfasano
Words 696
Pages 3
In 2005 the price of crude oil averaged $50.23 per barrel. In comparison, the average price for crude oil in 2004 was $36.98 per barrel. Fast-forward to the present, and the price of crude oil averages $77 per barrel. Additionally, taxes account for approximately 19 percent of the cost of a gallon of gasoline. In my state of Washington, each gallon of gas is taxed at 54.4 cents 1 and the average cost for a gallon of gas is $2.93 2 Even when crude oil prices are stable, gasoline prices normally fluctuate due to factors such as seasonality and local retail station competition. Additionally, gasoline prices can change rapidly due to crude oil supply disruptions stemming from world events, or domestic problems such as refinery or pipeline outages. Seasonality in the demand for gasoline - When crude oil prices are stable, retail gasoline prices tend to gradually rise before and during the summer, when people drive more, and fall in the winter. Good weather and vacations cause U.S. summer gasoline demand to average about 5 percent higher than during the rest of the year. If crude oil prices remain unchanged, gasoline prices would typically increase by 10-20 cents from January to the summer. Changes in the cost of crude oil - Events in crude oil markets were a major factor in an increase of gasoline prices for the past 10 years including present times 3. Crude oil prices are determined by worldwide supply and demand, with significant influence by OPEC who has tried to keep world oil prices at its target level by setting an upper production limit on its members. OPEC has the potential to influence oil prices worldwide because its members possess such a great portion of the world’s oil supply (approximately 40%). Rapid gasoline price increases have occurred in response to crude oil shortages caused by, for example, the Persian Gulf conflict in 1990, and...

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