Oil Crisis, Gas Prices

March 27th, 2012
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cost of oil

Everyone can see the daily rise and fluctuation of gas prices at the pump. Some of us know that the price of oil per barrel is over $125.00. A select few of us realize there are deeply involved socio-political and environmental problems causing all this ruckus.

On the environmental front, the problem is very simple. Oil supplies are finite and indeed running out. The demand however, is steadily increasing. The oil industry is expanding as fast as it can on a global level and increasing production efforts.

The problem is, in some instances, the cost of refining crude into gasoline is on the shoulders of publicly traded companies. These companies can only tolerate reporting profit loss for so long, inevitably the price of gas will go up.

The economy is ‘bouncing back’, or in a state of ‘recovery’. That is great news for Americans, but that great news comes with a hidden detriment. A recovered economy means more gas usage daily, as people will be less likely taking public transit or car pooling to save money.

Aside from these easily identifiable problems, Iran, Nigeria, and Venezuela are all going through political issues that exacerbate the global oil crisis. Iran has threatened to close the Straight of Hormuz, this would constrain the flow of 20% of the world’s oil.

In Nigeria, Islamic terrorists are causing civil unrest, and demanding Nigerian attention by attacking oil pipelines. Meanwhile in Venezuela, Hugo Chavez is having major surgery, given his battle with cancer, he may not be able to continue to hold office. These are precisely the type of political issues that may conflict with reasonable oil pricing.

With the many problems facing the industry as a whole it is no wonder prices are driving back up. Unfortunately, some analysts believe under these conditions gas will reach 5 dollars per gallon by 2013.

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