This page is a spinoff from The Causes and Effects of High Gas Prices.
The focus of this page is intended to be the supply and demand forces at work on crude oil, in today's worldwide
market. Crude oil is refined into many products other than gasoline, and when unrefined oil is spilled,
interrupted, traded as a commodity or shipped, it is always in huge quantities with lots of money at stake.
The oil market is seeing lots of demand from places like China and India, and faces interference from
political forces in oil-rich countries, like the civil unrest in Venezuela, war in the
Middle East, political instability in Nigeria, and the problem of too few refineries
in the U.S. -- which is largely the result
of environmental regulations.
There have been no new refineries built in the U.S. since 1976 because of the "environmental
impact" red tape that must be overcome before construction can even begin. Sometimes I hear people
say that the oil companies are hoarding gas to drive up the price, but the more gas they sell, the more
money they make. Obviously the oil companies would gladly build more refineries, if they could,
because that would bring more of their products to the market.
Lobbyists on the political left oppose oil exploration in the Gulf of Mexico and
in parts of Alaska, even though ANWR
is floating on 16 billion barrels of recoverable oil.
Many people are disgusted by the sight and the smell of refineries. (Have you ever been to
Port Arthur, Texas, or Hobbs, New Mexico? Pheweee!) Some are frightened by gas wells, pumps and pipelines
near their neighborhoods, but petroleum doesn't just appear out of nowhere. It has to be
refined somewhere and delivered somehow.
Conservation is a good thing, but conservation is not an energy source. The only way
to lower the price of oil (hence gasoline) is to increase production.