Why is gas going up

It has been found that the price of gas is going up once again, especially since last year, so within the span of this article we will try to discern the various reasons and arguments which could be and probably is responsible for this increase in the gas price. The most basic reason is of course the fact that there is not enough supply to fulfill the increasing demands of the world. The shortage is largely due to the inadequate supply of oil from the OPEC nations. The countries that form the OPEC are in control of a large fraction of the total oil resources on earth and since they have not made any significant progression to their production rates after the 1980s, it is easy to understand why the supply is not adequate. Countries that are not a part of the OPEC are either incapable of producing enough oil to meet demands or they simply do not have oil in their vicinity. The US on the other hand, has both the resources as well as the capability to produce oil but not up to a level where foreign import would not be required anymore. Therefore, it can be concluded that since the OPEC is not producing enough and since the other countries of the world are more or less dependent on them to meet their demands, the price of gas is increasing again.

Economic expansion in fast developing countries like India and China are also responsible for the increase. These countries were not demanding as much of the world’s supply of oil ten years ago, as they are today because of their rising economy and enhancing industrialization. If two countries with world’s largest and second largest population have increased their demand for oil greatly, then the already lacking oil supply would definitely not be enough to meet the total demand of the entire world. Insufficient supply would thus only lead to increase in price of the commodity, which is gas in this case. Another problem that links the status of the US dollar to the increasing gas prices is the fact that oil is priced at $x/gallon. Therefore, each time the value of the dollar as a currency comes down; it becomes cheaper in countries other than the US and costlier in the US itself. This allows other countries to buy more oil and that puts further pressure on the price of gas in the US. Unless the production rate of the OPEC increases significantly or some other significant sources of oil are found, the price of gas is bound to go only up. However, a few changes in the foreign policy regarding this issue could be a step towards halting inflation.