This paper examines the primary reasons gasoline prices fluctuate so frequently and dramatically. Drawing on data and explanations from the U.S. Energy Information Administration, economist Kimberly Amadeo, and U.S. Congressman Randy Forbes, the paper identifies crude oil prices as the dominant factor, accounting for roughly 72% of the price of a gallon of gasoline. Additional contributing factors include oil futures speculation, refinery outages, geopolitical instability in major oil-producing regions, natural disasters, seasonal demand shifts, and the declining value of the U.S. dollar. The paper concludes by suggesting consumer-level responses such as fuel-efficient vehicles and public transportation.
The paper demonstrates effective synthesis of multiple sources around a single explanatory question. Rather than summarizing each source in isolation, the writer weaves EIA data, journalistic analysis, and congressional commentary together to build a cumulative, multi-factor argument — a core skill in introductory research writing.
The paper opens with a direct question to frame the inquiry, then proceeds through two main explanatory sections — one on supply/demand and crude oil markets, one on speculative trading and distribution — before a brief conclusion. This classic funnel structure (broad context → specific mechanisms → consumer implications) suits short explanatory essays at the introductory undergraduate level.
Why do gasoline prices fluctuate so wildly and frequently? One month the price of gasoline is around $3.50, and the next month prices have jumped to $4.00. There are several reasons offered by government authorities and other sources, and each of those reasons is examined below.
According to the U.S. Energy Information Administration (EIA), the price of crude oil on the world market is a "major reason" for changes in gasoline prices. Ultimately, crude oil prices are the primary driver of extremely high gasoline prices in the United States. The price of crude oil is "greatly affected by levels of supply relative to actual and expected demand" for the various petroleum products made from crude oil, including gasoline.
In 2012, for example, oil prices went up and down on a wild roller-coaster ride, which was a reflection of "concerns and expectations for the world oil supply, economic conditions, and petroleum demand," the EIA explains. From January to March 2012, violence and social turmoil in Syria, Yemen, and South Sudan created what the EIA calls "a tightening of world oil supply." In June, however, the Organization of Petroleum Exporting Countries (OPEC) began producing more oil, as did the United States, and gasoline prices at the pump consequently fell.
In the summer of 2012, gasoline prices rose again. The EIA attributes this to "seasonal increases in petroleum demand" as well as concerns about possible oil supply disruptions in the Persian Gulf. The EIA also notes that refinery outages and global demand for petroleum products each have a measurable impact on the price of gasoline.
Journalist Kimberly Amadeo, writing for About.com, echoes the EIA's analysis. High crude oil prices cause high gas prices, and the fluctuation of crude oil prices accounts for 72% of the price of a gallon of gasoline. The remaining 28% results from "distribution, refining, and taxes" (Amadeo, 2013). Going further than the EIA on the mechanics of price changes, Amadeo explains that oil prices are "primarily controlled by oil futures contracts, which are traded on the commodities futures exchanges."
In other words, investors play a significant role in determining gasoline prices. When speculators believe the cost of crude is going to be higher, they "bid it up even higher," and commodities traders create a "self-fulfilling prophecy by bidding up oil futures prices" (Amadeo, p. 1). This bidding — undertaken to generate profit — leads to what Amadeo calls an "asset bubble," and, as she bluntly notes, "unfortunately, the one who pays for this bubble is you!" (Amadeo, p. 1).
Families on tight budgets, along with those who are unemployed or facing home foreclosure, are severely affected by high and unsteady gasoline prices. Based on the available evidence, the culprits behind these fluctuating prices include oil-producing nations, market speculators who bid on oil futures, refinery problems, and natural disasters, among other causes. Because individual citizens have little direct power to lower gasoline prices, the most practical response is to reduce consumption — by purchasing hybrid or fuel-efficient vehicles, taking public transportation, or even riding a bicycle to work or school.
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