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Exploding Gas Prices

Exploding Gas PricesExploding Gas Prices

Once again oil prices are on the rise just in time for the summer vacation in North America and Europe. It feels as if this is a plot against anyone who wants to take a driving vacation. Or fly somewhere for their summer vacation. Anyone who drives to work has already felt the pinch of gasoline prices. They have gone up as much as 20% in the last few months. We are currently on a driving trip across the country. I was wondering just how much the increasing gas prices were going to affect our trip.

Well it turns out that if you take the average price of gas at the time of writing this post as $3.63 and compare it to the price of gasoline at the pump at Christmas time, which was an average of $2.98; our trip is going to cost roughly $200 more in gasoline alone.

Impact of Rising Gas Prices on Our Standard of Living

While this amount is not as much as I expected for a 6000 mile trip, it still adds up when you take into account the other things that also go up at the same time due to increasing prices for gasoline and diesel. When you are travelling across country you begin to realize how large the country really is and also how many trucks there are on the roads. There are literally thousands of them on the road and you begin to realize that much of the fruits and vegetables we enjoy are carried by these trucks. When the cost of diesel goes up so do the prices of our vegetables, the products we purchase and virtually the cost of everything we consume is affected.

We all take a hit on our standard of living when gas prices increase. If you spend it more of your money on filling up the car, there is less money for other things. If everything is going up, inflation begins to raise it’s ugly head and we all fall further behind when it comes to enjoying the quality of life that we are used to. There really is no choice, you either get a raise or you cut back and guess what we have another recession!

Is another Recession On the Way

The economy is just beginning to pick up speed and people are just getting back to work. If consumers start cutting back on their purchases, companies will stop hiring. Maybe even start laying employees off. The entire economy will stall again before it really even gets started on a solid recovery. The real answer to whether another recession is on the way or not depends on how long this current crisis lasts. If this current crisis in Iran is resolved within a month or two, perhaps even before this post is published then prices will fall quickly back to recent averages.

If the Iranian crisis continues or escalates for any significant length of time, we will see continued price increases. Perhaps a recession beginning later this year. With gasoline prices nearing $5.00 per gallon in many states and $6.00 in at least one state at the time of writing, we will almost certainly have another recession before the year is out.

Why are the Oil prices Increasing So Much

The current rise in oil prices is apparently driven by the perceived crisis in Iran. It is amazing to me how every year there is some crisis that pushes oil prices higher which in turn drive gasoline and diesel higher. If it is not a hurricane, it is a refining plant shut down for maintenance. Or a pipeline disaster or  it is a world crisis such as the current Iranian crisis. From a casual observer’s perspective although these are real situations, it makes you wonder. Are the dramatic price increases is not somewhat contrived. If you ask yourself who benefits from increased prices, you may get a hint of why these prices are increasing so much. Also why so little is actually done to control the prices.

Governments Are Receiving a lot in Tax Revenue

The governments make huge money off of rising prices. Snce the tax rates are usually a percentage of the base price so every time prices increase, so do the tax revenues. Governments are hurting and every tax dollar they can get will help deal with huge deficits. The oil companies also benefit obviously and they just add more to the billions in profit they make each quarter! But what is really galling is the money made by the speculators. They drive prices up the moment there is a rumor of some sort of world issue. Does a potential crisis in one country really make that much difference? Or how about shutting down an oil rig or two due to a hurricane. Fear and greed are really what drives the prices up. The majority of the population is taken advantage of by having to pay higher prices for everything.

What are your thoughts on the ideas presented in this post? Do you agree? Or perhaps you have a different opinion. Leave us your comments. Well written comments will be graciously accepted including links. All link builders only will be filtered out by our spam engines.

 

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One Response to “Exploding Gas Prices”

  1. gas prices have come down, but only because we are going into another recession and everyone is laid off. They will go up again, as soon as things start to pick up, then what do we do?

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