Why are gas prices so high?
David Olive of TheStar.com poses this question in a recent article and comes up with some interesting reasons behind gas cost hikes.
Mr. Olive concludes that there are three main reasons for high gas prices:
- Geopolitics
- Big Oil
- Consumers
Basically, most of the world’s remaining major supplies of untapped oil are in politically and geographically hostile regions. The push for biofuels such as ethanol by both Washington and Ottawa has discouraged refineries from adding capacity.
Last year, the oil industry spent $52 billion buying back its own stock, an artificial way of inflating earnings per share. That’s enough to finance the construction of 17 new refineries. Fewer and fewer dollars are being invested in exploration, development and refining of oil and gas.
Consumers refuse to cut down on consumption and demand. In the first three months of 2007, as prices were flirting with $4 a gallon in California, U.S. gasoline use climbed 2 per cent, almost double the previous year’s rate.
Even as gas prices rise, we’re using more gas than ever.
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To be fair, if you’re selling something for $2 and consumers are willing to pay $4, wouldn’t it be stupid to sell it for $2?
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