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Why Are Gas Prices So High? And Four Simple Ways to Lessen the Impact

This is a repost from last year, but sadly, it’s still all too relevant — if not more so!

If you’ve bought gasoline in the last few days (anywhere in the USA) then you’ve paid close to or over $4/gallon. In some areas this is over 10 cents more per gallon than just over 2 weeks ago. What does that amount to? At least $100 Bn additional spent on fuel over the last few weeks. And on a more personal level? It’s $33 more spent by every man, woman and child in America.

Whichever way you look at this it’s more money coming out of your pocket. And it’s not just when you fill up your car. It shows up in the price of groceries (the stores pass the fuel cost through to you and I), in the price of services and in the price of gas/electricity for our homes (especially if you’re not on fixed rates).

But is this spike in cost really justifiable? The answer is a big NO.

The only reason we hear for the gas price increase is the unrest in the Middle East (especially Libya right now). Two wrong assumptions are made when this reason is given:

1. The Middle East supplies the bulk of US Oil:

Libya only supplies about 1% of US crude. Saudi Arabia supplies only 11% and other Middle East countries supply another 7%. The US actually gets the bulk of it’s oil supplies from the Americas (Canada, Mexico, Venezuela etc). And Net Imports of fuel have been reducing. But we think (or are made to think) that the bulk of supply comes from the Middle East.

2. Crude Oil price increase = Pump price increase:

The gasoline you buy at the pump today was drilled somewhere between 3-6 months ago. Yes. 3-6 months ago! It was refined, converted and stored. So that there is unrest in Libya today should, technically, not affect the pump price until the Summer. But the neighborhood gas station (which actually makes its money when you buy the Snickers at the station convenience store) reflects the ‘gas price increase’ only 2 weeks after unrest starts. Again it’s a perception thing.

So what can you as a consumer do to reduce the impact of the gasoline price increases on your wallet?

- Drive less: The CTA/Metra/Public Transport System provider cannot jack up bus and train prices on a whim like the gas stations can.

- Lighten the load in your car: Get the junk out of your trunk (heh heh) and you’ll need less gas to drop your kids at school, ballet, etc.

- Shop local: Locally sourced produce comes from closer to you and hence the fuel costs will not, for the most part, increase the costs. The food is better for you, too (contains fewer preservatives).

- Carpool: Saves on cost. It might even be an opportunity to know your neighbors (you know what they say about people becoming more likable when you get to know them).

Any other ideas on how to reduce the impact of increasing gas prices?

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