A reader asks:

Being old enough that I remember the gas shortages in the 70's and 80's and being that the price per barrel of oil has now reached the same price as back then (as adjusted for inflation) what I don't understand is: Where are the gas lines?

High oil prices in the 1970's were a result of the OPEC oil embargo, which started in the fall of 1973. U.S. oil imports went from 103 million barrels in November 1973 to 83 million barrels in December, reaching a low of 63 million barrels in February of 1974. This meant that there was not enough gasoline to meet demand, resulting in gas lines. (Source: EIA, U.S. Crude Oil Imports)

However, the high oil prices of today are not caused by a decrease in supply. In fact, oil imports have remained at a fairly steady 13 million barrels per day for the last four years.

Today's high oil prices have been caused by a decline in the dollar. First, oil is priced in dollars, so OPEC needs to raise the price of oil to maintain its profit margins. Furthermore, as investments such as real estate and stocks decline, traders are getting into commodities such as gold and oil futures. This is causing a bidding war, and a potential bubble. (Source: USA Today, Oil Briefly Spurts Near $104 per Barrel, March 3, 2008)

For more about how oil prices affect gas prices, see Gas and Oil Prices - How Oil Prices Affect Gas Prices.

Related Reading

• Crude Oil Prices Definition
• How Are Oil Prices Determined?
• Value of the Dollar, and How It Affects You