Introduction
The situation in the global energy sector is just unbearable; in fact to be honest the situation is one that almost calls for something like divine intervention if the poor folks of the world today are to be protected from the skyrocketing fuel prices. The grim situation can be salvaged if only the current administration stop burying its head in the sand like the proverbial ostrich. It is no secret that the escalating fuel prices have been attributed to the OPEC. If this is a cartel then why not start our own cartel? The US and Europe in the early 1970s came up with a cartel that did not survive, but I say this is an opportunity to have our own counter cartel. (zFacts.com 2008). They both chickened out because the situation in the energy sector at that time was not as desperate as it is today. Despite the U S being a major producer of oil it still has to depend on the OPEC to meet its high demand.
Problem Statement
The problem of the ever increasing gas prices is perhaps best captured by USA TODAY in an article, “Our view on gas prices: Grandstanding on gas” on which they say, “this is becoming a spring ritual, as predictable and irritating as pollen borne on a late may breeze. Prime driving season arrives, gasoline supplies cant keep up with the demand, prices rise, and politicians play on the publics anger to curry flavor. An allergic reaction is in order.” To try to show the citizens that it is trying to put the situation under control several steps have been advanced towards providing solutions. In 2007 the congress came up with legislation (Energy Independence and Security Act of 2007). It was passed that Manufacturers’ automotive fleets to average 35 MPH by 2020. A good share of budgetary allocation was to be set aside to advance research requirements for the use of biofuels were to be raised. Competitive grants were indeed offered to develop plug in electric vehicles.
These steps are solutions for the future and not short term solutions. With the prices heading north anxiety still remain to be seen among the consumers. According to the data provided by the Energy Administration (EAI) gasoline price for regular unleaded gasoline in the US rises weekly since January 2008. The pressure continued to be felt but the worst was still to come. On May 14th 2008 helpless consumers were surprised when the price hit an all time high of $3.10. Although there have been advances in the field of research to come up with more efficient and reliable forms of energy needs of the consumers with regard to gasoline have to addressed.
As suggested in the Michigan university document centre, in the light of gasoline prices, “it is important for us as consumers of gasoline to also think of the factors that are attributed to this scenario.” I know each person will come up with a list that is as unique as he or she is. But mainly there are four factors that have been found to notoriously cause an increase of gasoline prices. With so many vehicles hitting the roads every day it is expected that demand for gasoline is expected to go up. Increase in demand has created problem number two which is pressure on the refinery capacity. With increase in demand it is expected that measures should be put in place to cater for the increased demand, but this is not the case as there is no expansion of the available refineries. Declining trend in gasoline inventories is also a factor for the rise in the gasoline price. It should not be forgotten that environmental degradation is a major challenge for the 21st century. In order to conserve the environment some states have put in place regulatory measures such as national air quality standards that have induced some states to switch to special gasoline blends. This special blend of gasoline carries with it cost implications that trickle down to the final consumer. Iraq for example, is a major producer of oil and is still very much unstable. With instability prices are pushed up as most of the gasoline consumers continue to suffer helplessly.
As the federal trade commission officials have pointed out, sometimes it is the consumers who are their own worst enemy. Although factors influencing fuel prices are more often than not attributed to the Market failures and failed policies, to some extent consumers themselves contribute to this situation. If consumers complain of the high prices but still continue to buy the gasoline at current high price then the price is even more likely to rise. “Therefore, there is no need to be hypocritical by complaining that the price is high while at the same time we continue to consume more,” as also asserted in Askville.com. In any market if the consumer reduces consumption due to increased prices the market will respond by a reduction in prices, but this is not possible as world populations increase. As stated by zfacts.com in “Why are gas prices so high?,” “Oil prices are high because World demand is up and World supply is not.” This has been contributed to by the fact that china and India are booming fast and OPEC has not yet increased capacity since almost 30 years ago.
Despite there being increased research in alternative energy there is no breakthrough. The end consumer is put at an even higher risk of exploitation by the oil cartels due to the lack of substitutes in the energy industry. Lack of substitutes does not mean that the consumer cannot do anything to salvage the already worsening situation. According to the US government accountability office, in an effort to encourage people to be less dependent on gas advises that, change in the living lifestyles like changing from driving to walking, riding bikes, taking the bus or the subway needs to be considered.In addition the choice of more efficient vehicles to reduce the consumption of fuel can help to a certain extent.
The federal Trade Commission in the report, “Gasoline Price Changes: The Dynamic of Supply, Demand and Competition,” has identified some factors which currently affect the prices of gasoline as, “cost of crude oil, increasing national and international demand, federal state and local regulations.”. According to the US Government Accountability Office, “few issues generate more attention and anxiety among American consumers than the price of gasoline. The most current upsurge in prices is no exception,” and this will continue for a long time to come.
Reference
Factors that Influence Gas Prices. 2008. Web.
The Library of Congress. Energy Independence and Security Act of 2007.
Federal Trade Commission. FTC Releases Report on “Gasoline Price Changes: the Dynamic of Supply, Demand, and Competition” 2008. Web.
University of Michigan Library. Documents centre. Gasoline Prices. 2008. Web.
USA TODAY. Our view on gas prices: Grandstanding on gas. 2007. Web.
U.S. Government Accountability Office. Energy Markets: Factors That Influence Gasoline Prices. 2007. Web.
Current Gas Prices and Price History. 2008. Web.