I was sitting there having a mind freeze on what to write and I looked over to my wife and asked her for a topic. She said, “gas.” Sitting there thinking that was out of left field, I pretended not to hear and said huh. Gas prices, Ahh gotcha!
Well if you haven’t noticed gas has been creeping up, it seems as though every time I drive past a gas station it is 10 cents higher than it was an hour ago. I read an article the other day that crude prices over $100 a barrel are going to be the new norm. There are over 160 different types of oil so they use the terminology of barrel to describe all these types. A barrel is approximately 42 gallons.
The basic law of supply and demand with respect to the gas situation is that there are more users of gas while supplies have remained relatively flat. As demand increases and supply remains unchanged, this results in a higher equilibrium price. The Organization of Petroleum Exporting Countries (OPEC) is a cartel comprised of 12 of the largest oil producing countries. OPEC has a large influence in the prices of oil throughout the world.
Oil is an important commodity that is traded in the markets today. The supply of oil is heavily regulated by the OPEC nations to maintain higher prices. Ultimately the gas that we use is a combination of the overall supply and demand of oil, coupled with the quality and ease of refining the oil into gasoline. Companies like Southwest Airlines have used fuel futures as a hedge against rising fuel prices. While this may not be practical for you or me, but if you own a company this may be an option to explore.
At any rate it looks like $3.90 and above gas prices are here to stay at least for the time being. Prices today may not be as high as they were in 2011 when the average price was $3.99 or July 2008 when the record was $4.11. Time to start looking at all of my expenses as the price of gas will put more and more pressure on my personal budget.