Welcome to the AgFreight.com March Newsletter
So why do gasoline prices go up and down from one day to the next?
Rising crude oil prices and restricted world supplies are the two major reasons. Here are some of the major factors that contribute to those circumstances, according to the American Petroleum Institute and the U.S. Department of Energy's Energy Information Administration:
OPEC | The international organization is cutting production.
Political instability | Unstable situations in nations that produce a lot of oil, such as Venezuela and Iraq, can cause uncertainty in the global marketplace.
Global demand | The more demand there is for crude oil, the higher the price goes. Demand is particularly high in the United States, where the rate of economic growth continues to rise, and in China, where crude oil imports increased 30 percent in 2003.Global demand | The more demand there is for crude oil, the higher the price goes. Demand is particularly high in the United States, where the rate of economic growth continues to rise, and in China, where crude oil imports increased 30 percent in 2003.
New fuel specifications | Exporters outside the United States who have not changed their gasoline to meet new U.S. standards may be trying to peddle their gasoline to other nations, meaning a decreased supply for the United States. Plus, those new specifications require major investment.
Costly distribution | When the cost of getting gasoline to its destination rises, so does the price.
Political pressure | It is increasingly difficult for oil refiners to find new spots for refineries, pipelines and other facilities.
SUVs | Demand for gasoline has increased along with the sale of large passenger vehicles.
Seasonality | Summer is peak driving season, especially in the United States. Even when crude oil prices remain relatively stable, the high demand for gasoline for vacation trips can spark price increases. The EIA estimates that even without changes in crude oil prices, gas prices would rise by five or six cents between January and summer.
Lack of choices | According to the Energy Information Administration, the prices of basic energy sources, like gasoline, natural gas or electricity, fluctuate more than those of other commodities because it is more difficult to find substitutes for energy sources. If the price of a food product goes up, a consumer can substitute something else, but other fuel choices aren't as readily available.
