Last updated on January 9th, 2023 at 07:08 am
Gas prices have been so low for so long that many Americans have forgotten what it’s like to see prices at the pump go up.
Before we look at why gas prices are going up it is important to understand the factors that determine the price of gas and also realize that gas prices have actually dropped substantially in the United States.
Supply And Demand – The basic law of supply and demand drives the price of gas. When there is more demand for gas than there is available supply, prices go up. The opposite is also true, when there is more gas available than people are willing to buy, prices go down.
Refinery Capacity – Another important factor is refinery capacity. If there is a shortage of refining capacity, it can lead to an increase in gas prices.
Crude Oil Prices – Crude oil prices are another major factor that determines the price of gas. When crude oil prices go up, so do gas prices.
Geopolitical Instability – Gas prices can also be affected by geopolitical instability. If there is a conflict in a major oil producing country, it can lead to an increase in gas prices.
Taxes – Another factor that can influence gas prices is taxes. Higher taxes on gasoline will lead to higher prices at the pump.
Now that we know the factors that determine the price of gas, let’s look at why prices have been going up recently.
Supply and demand is a major factor in the current increase in gas prices. There has been an increase in global demand for oil, while at the same time there has been a decrease in production in countries like the United States.
Lately the Biden administration has paused new oil and gas leases amid legal battle over cost of climate change.
Although there has been an increase in oil production since Biden has been in office from about 11 million barriers per day to 11.5 million barriers in 2021.
This however has not met the increase in demand of oil that has occurred as the United States economy continues to grow and the reopening of economies.
The Organization of Petroleum Exporting Countries (OPEC) has also decided to cut production in order to try and increase prices which means more money per barrier of crude that their member countries sell.
Then there is the war in Ukraine which has led to sanctions on Russian, with Russia being the largest exporter of gas, exporting 201.7 billion cubic meters of gas in 2021.
All of these factors have come into play in recent months, leading to an increase in gas prices.
Why Are Gas Prices In California Higher Than The Rest Of The Country
There are a few reasons why gas prices are consistently higher in California than the rest of the country.
One reason is that California has its own unique blend of gas, which is required by state law. This means that gas stations in California cannot sell the same gas as stations in other states, which leads to higher costs.
Another reason gas prices are higher in California is because the state has some of the highest taxes on gasoline in the country. These taxes help to fund things like public transportation and environmental initiatives.
Finally, California is home to some of the busiest ports in the country, which means that there is a lot of demand for gas. This high demand often leads to higher prices.
Oil Companies
Oil companies have come under fire in recent months over their high profits. In the first quarter of 2021, the five largest oil companies made a combined profit of $35 billion.
With gas prices on the rise, people are once again calling for oil companies to be taxed more.
The government has also been working on increasing taxes on oil companies.
Recently, the democrats proposed a carbon tax which is to apply to fossil fuels like oil, natural gas, and coal. The tax is meant to discourage the use of these fuels in order to help reduce emissions.
The tax has been controversial, with some people arguing that it will lead to higher gas prices.
The average price of gas in the United States has gone up from $3.34 in January and is now about $3.99 after dropping from a high of $ 5.10 in June.
What do you think about the current state of gas prices and who do you think is to blame? Let us know in the comments!
