Rising Gas Prices Term Paper

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Rising Gas Prices

There are many different reasons why gas prices are rising so rapidly and it often depends on who one asks this particular question of. Many economic analysts share different views about the rise of gas prices and the media has also spent a great deal of time covering this issue. There is something about rising gas prices on the news, in the papers, and on the Internet almost constantly and it is difficult for Americans to avoid the issue or stop being reminded of it when they read or watch television, or when they get on their computers to look at the news of the day. It is also difficult for Americans to forget about this issue every time they drive their cars or pull up to the gas station because every mile they drive reminds them that they are spending more money than they used to be to make the trip to work, drive the kids to school, and countless other things. Every time they fuel their cars they are reminded that gas prices are still on the rise.

One of the strangest issues about gas prices is that, even though they are rising rapidly, the variance of how much gasoline costs per gallon on any given day across the country is fascinating. For example, gasoline may be $2.01 per gallon in Florida while the same gallon of gasoline would cost $2.55 in California. Naturally, some states seem to have more wealth than others but one thing is certain, and this is that gas prices everywhere, all across the country, are continuing to rise. Sometimes, there is a slight decline seen in gas prices and they might drop a few cents for a little while. However, this is usually only temporary and the gas prices do not stay at that lower level. Instead, they rise again after only a few days, and often they go higher than they were originally, before the slight dip in prices was seen.

Many people believe that the fact that America is basically at war with the Middle East right now is the reason that gas prices have risen so high (Joyner, 2005). This may be part of the issue, but it is not all of the reason behind the rising gas prices. How much a barrel of oil costs has a lot to do with whether gas prices are rising, and since much of the oil comes from the Middle East, it is a factor. However, there are gas stations across the country that the do not buy gasoline from the Middle East, and instead purchase it from gasoline suppliers and oil suppliers that can be found within the United States and other countries (Joyner, 2005). For quite some time, the Internet and e-mail boxes of various individuals seemed to be filled with requests to purchase gasoline only at stations that did not buy oil from the Middle East. However, this will not actually fix the issue of rising gas prices, nor will it fix any of the other issues related to the Middle East that America seems to be facing.

Another reason that gas prices are rising so rapidly is simply demand. The idea of supply and demand controls much of the issue with rising gas prices (DeWeese, 2005). More individuals are driving, the population of America is getting larger, minimum wage has been raised in many states, and there are many other issues going on with the economy that affects how much Americans are willing to spend and what they are willing to do. Because the demand for gasoline is high, the prices go up (DeWeese, 2005). If no one was purchasing gasoline then the stations would have to lower their prices in order to entice individuals to buy gasoline. However, there are so many people that are purchasing gasoline now that many of the stations are aware of the fact that they can raise their prices to whatever they want them to be as long as they stay reasonably in line with other stations in the area, and they will still have plenty of customers lining up to buy their gasoline.

Naturally, the reasons behind why gas prices are rising are important but how gas prices and their rise is affecting the economy is even more significant. There are several affects on the economy. First, those that are involved with the ownership of gasoline stations, oil refineries, and others that work closely with this type of product are seeing higher profits, but they are also having to spend more money for the items that they need to create an end product for the purchaser of gasoline (Kirms, 2005). In other words, companies that buy oil from the Middle East and other suppliers are making money because the gas prices are so high. On the other hand, these same individuals must also pay more money than they used to pay to get the barrels of oil that they need to create gasoline. Many people think that the economy is being affected generally by gas companies and oil companies gouging the public to make huge profits. In reality, however, most of the gasoline companies and many of the oil companies are not actually making any more money, because it is all being spent to purchase what is needed to finally get the gasoline to the consumer.

Gasoline comes in tanker trucks to the stations, and this is no secret to most people. One of the main problems with the fact that gasoline keeps rising is that it costs more for the tanker truck bringing the gasoline to the stations to drive to the stations (Kirms, 2005). Part of the reason that the price of gasoline is going up is simply due to the fact of the tankers' use of gasoline to bring their supplies to the stations. The more that the price of gasoline rises, the more it will cost the gasoline tankers to bring this new, more expensive, gasoline to the station. It becomes a vicious circle that affects the transportation sector of the economy.

The second major way that the economy is affected, however, does not have anything to do with gasoline tankers specifically, but everything to do with transportation. Almost everything that is brought to the various grocers, supermarkets, department stores, and other stores comes by truck at least for some part of its journey (Burrows, 2004). Because this is the case, the gasoline that is being used in these trucks in order to transport the product from the factory to the store is costing more and driving up the price of everything else (Burrows, 2004). For example, if it used to cost a department store $100 to transport a truckload of goods across the country, it now may be costing that same department store $125 to transport that same truckload of the same goods to the same place. All other things being equal, the company that makes the goods and transports them has two choices. It can either make less profit, or it can raise the prices (Burrows, 2004). Most companies are not interested in making less of a profit, so the prices of the goods that are transported to the store will likely go up.

When the company that makes these products asks for more money for them, the store that purchases these products has three choices. The store can not buy the products anymore, the store can absorb the extra amount of cost and make slightly less profit on that item, or the store can raise the prices (Burrows, 2004). Most stores, like most manufacturers, do not like making less profit. Most stores also understand that the goods that are shipped to their stores on a regular basis come for a reason --…

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