Why are gas prices so high?

Gas prices have been rising consecutively for the past months, it went from 70 cents/L couple of months ago to the current price of $1.40/L. Several reasons were used to explained the raise in the cost of gas, and none of them really make senses, at least to me.

China.

That’s one of the first reasons used to explain the raise from 60 cents to about 90 cents, everyone knew that China have a large population, and it is modernization within the last 10 years meant a high demand on gasoline. The reason why I said it was an ‘excuse’ and didn’t make much sense is simply because China have its own oil fields, and they would rarely import gasoline, if they did import it on a regular basis, this report would be pointless. Hence it is irresponsible to pin the blame on the Chinese accusing them as the cause of high gasoline cost. Which of course after several months, people realized and this haven’t officially came up since summer 2008 began.

Demand.

This can be answer by you, the reader. Does fuel cost crosses your mind when you are buying a new car, if you are buying a new car? Would you not reconsider before taking that gas sucker, which goes a 1L/5KM of gas before you go anywhere?

The demand for gasoline was always here, ever since the days of the first leaded gas automobile. This demand will always be there as well, the only thing that might have changed between the 80s and now are that our car’s engine are WAY more efficient.

I find it difficult to believe that because of more efficient engines, and an aging baby boomer population, we have a higher demand on gas.

MyView

There are several more reasons flying around, some of them include ‘unknown’ issues. I would say that there is a reason why Gas prices can be so high, and maintained its prices there. It is the only thing keeping us from going into a world wide recession.

My theory is that since the burst of the sub prime mortgage bubble, most major countries’ economies have been heading downward. For those who lost monies in the sub prime crisis, their goal should be to regain their losses within the shortest period of time. Hence, the most ideal strategy would be to make that money back from a highly demanded, limited supply goods. In this case crude oil was chosen instead of other less used resources such as natural gas or electricity. This is my theory, that once a gigantic portion of the deficit is regained, we’ll see the gas price drops back to around a dollar/L. This, as most people would say, must be near the end of this summer.