happy i’m driving less

The cost of a gallon of gasoline has risen fast this month.  In 10 days, it rose $.25.  It’s now about $3.50 a gallon near us and experts expect it to go higher.

I don’t know all the ins and outs of what determines the cost of gasoline, but it seems to me this is going to hurt our economy even more.  I try to look at this from an economical, logical view-point instead of emotionally and how hard it is hitting my pocketbook.

Part of the cost of gasoline is the cost of the crude oil that gets refined into gasoline.  This has sky rocketed from about $85 a barrel at the end of February to almost $105 today.  A lot of blame has been placed on the unrest in Libya, but Libya only provides about 2% of the world’s oil, and the U.S. doesn’t import any oil from Libya at all.  But this is not the only thing affecting the price of a barrel of oil.

Supply and demand.  I remember this concept from my economics classes in college.  The more demand, the less supply, the higher the price.  Demand for oil is certainly affecting the price.  The world is using more and more oil.  Production of oil has not kept up with this demand, whether by choice or not.  Hence, higher prices.

The higher the price for the oil, the higher delivery costs, not only for the oil, but also for the gasoline derived from it.  Those that deliver are having to pay higher prices for the fuel used to deliver the fuel.  Now that’s a vicious cycle!

Weather (hurricanes in the vicinity off shore drilling) and other production events such as the explosion on the oil platform in the Gulf of Mexico affect the price of oil.  There are many other things that also affect the cost of oil.

For the gasoline itself, demand often has a big impact on the cost.  Right now, the demand is low.  Will it remain low because of the prices?  As we get closer to summer here in the U.S., when a lot of people do more driving, will demand rise taking the priced even higher?  I cannot imagine what the price of gas will be by July.

We do not have enough refining capability here is the States to keep up with demand.  We actually have less refinery facilities, with less capacity, than we had in 1982.  There is such a low profit margin on oil refineries that most companies are reluctant to build new ones.

All of this has led to the prices we are seeing at the gas pumps today.  I know we still pay a lot less for a gallon of gasoline than people do in other countries, but I’m glad that I do not have a commute for a few weeks.  I filled up the tiny, little gas tank on my tiny, little pick-up truck yesterday, and it cost over $45!  I’m going to make that tank last for a while.

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10 Responses to happy i’m driving less

  1. melsar93 says:

    Unfortunately for me I am driving more than ever these days with my new commute. I have friends who are glad to see the prices go up because maybe it will force people to make smarter decisions about driving, but I think that threshhold is much higher than $3.50 a gallon. If gas was $10 or $20/gallon people might hop on their bike to go a mile, but at $3.50 that mile only costs about 20 cents.

    • Seashell says:

      I try to walk for short distances, but there’s not much within walking distance where I live. No public transportation either. I couldn’t imagine prices going above $4 a gallon much less up to $10.

  2. Dillon says:

    I’m getting ready to drive cross-country to visit family in the near future. I really hope the prices go down a little by then…

  3. classyrose says:

    Hi Shell, There are some who will stop driving or cut back, but there will always be more who are getting their first car and getting on the road.

    The oil companies are still making a profit and the government is taking in more money with every price increase since the taxes are added to the cost of gas. 🙂

    • Seashell says:

      That is so true Rose! The taxes are the killer, especially in Europe. I wouldn’t mind it so much if they would use the taxes to increase/better public transportation, but that’s doesn’t seem to be the case here. They say the use it for roads, etc. but they are awful, too! I wonder if they truly know where our tax dollars go?

  4. Theresa says:

    $3.50 a gallon here as well. The spouse’s commute is 250 miles a week…very glad to see spring-like weather so he can take the bike!

  5. We buy fuel by the litre and it now costs about about €1.40 We now have to ask ourselves whether a journey is really necessary. We live in the country so we have to use a car… 😦

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