Jul 14, 2008 6:56 pm US/Eastern
3 Reasons Why Gas Prices Are So High
BALTIMORE (WJZ) ―
This week, in a special Pumpwatch series,
Eyewitness News is tackling the issue of high gas prices.
Mary Bubala has the answer to the burning question of why gas prices are so high.
Each time you fill up your tank, you're probably wondering how the price of gas got to be so high, so fast.
Eyewitness News was granted rare access inside the Department of Energy in Washington, D.C.
Guy Caruso is an expert on analyzing oil and gas prices as the head of the Energy Information Administration.
Caruso names the top three reasons gas prices are so high right now.
"The main reason gas prices are so high is very strong global-economic growth which is sending demand up sharply, inadequate response on the supply side to add supply to the market and thirdly very limited spare productive capacity," he said.
In breaking that down, we're operating a world oil supply at 85 million barrels a day. The spare supply is only 1.5 million barrels. That's not enough cushion, and it keeps oil prices up.
There's disruption in the oil supply from places like Iraq, Nigeria and Russia.
For oil-rich countries Saudi Arabia and Venezuela, there's little incentive to flood the market with oil when the profit margin is so high.
Then there's demand. Since 2004, it's surged from places like China and India. Each has a population of more than a billion people.
Just this month, charges that financial speculators on Wall Street are fueling the rising price of oil took center stage at a hearing on Capitol Hill.
"The acute problem is financial speculation in the commodities futures market," said Michael Masters, Capital Management.
So there is no short answer. High gas prices are the result of a chain of events that led from cheap gas to $100 tankfuls.
The question now worth asking is when will prices go down.
"We don't see any short term relief, but over three to five years we do think new suppliers will come online," said Masters.
Top energy officials estimate we will pay, on average, $3.90 a gallon through 2009.
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