Why Are Gas Prices So High?:
Distribution and taxes influence the remaining 45% of gas prices. In May 2011, as oil prices dropped, gas prices stayed high. Why? Commodities traders were concerned about refinery closures due to the Mississippi River floods. Usually, distribution and taxes are stable, so that the daily change in the price of gasoline directly reflects oil price fluctuations.
How High Oil Prices Make High Gas Prices:
When Else Have Gas Prices Been High?:
What Is the Biggest Factor in High Oil Prices?:
Another reason for high oil prices is the declining dollar. Since oil is denominated in dollars, the 40% decline in the dollar in the last six years puts upward pressure on oil prices. (Source: BBC, Oil Price May Hit $200 a Barrel, May 7, 2008)
Sometimes commodities traders drive up the price of oil, even when supply increases and demand falls. The EIA cites an increased flow of investment money into commodities markets. In other words, money that used to be invested in real estate or the global stock market is now being invested in oil futures. (Source: EIA Short-Term Energy Outlook)
What Makes High Gas Prices Go Down?:
What Can We Do About High Gas Prices?:
Longer term, we can change our need for oil and gas by switching to alternative fuel vehicles, using public transit and moving closer to work to reduce commuting time. This will reduce the impact of gas prices on each of us individually by reducing use.
Could this reduction in itself reduce gas prices? It could, if it could reduce demand for oil enough to lower oil prices. It would have to happen on a sustained basis over a long period of time. That's because gasoline accounts for only 20% of each barrel of oil. Oil companies would still profit from the non-gasoline parts of their business. Therefore, even if consumers could conceivably stop 100% of gasoline use, oil prices might only decline 20%.
Furthermore, other pressures on the price of oil, such as dollar decline and commodities traders, would not be impacted by a gasoline boycott.
Could a gasoline boycott force gas prices down even if oil prices stayed high? Probably not by much. That's because the other elements of gas prices would take a long time to change. Taxes, which comprise 19% of gas prices, would require legislative approval, which could take months. Refinery costs (also 19%) couldn't be lowered, and neither could distribution costs (9%), both of which are fixed. (Source: EIA, A Primer on Gas Prices)
A boycott of one brand of gas could actually increase prices, since there would be fewer gas outlets. Those companies that were boycotted would simply sell their gas to those that weren't boycotted, defeating the purpose.
The only real way to lower gas prices is to lower demand for gas and oil over a long period of time. This would work, since the U.S. consumes 25% of the world's oil. This has increased over the last 20 years, from 15 million barrels per day (bpd) to 20.7 million bpd. A concerted effort might convince commodities traders, who have driven oil prices up 25% in the first quarter of 2008, that oil was a bad investment, thus allowing oil prices to return to pre-bubble levels. Article updated February 10,2012
