PERSPECTIVE: Cause and Effect – U.S. Gasoline Prices
ASP released a “Perspectives” paper last April entitled, “Cause and Effect: U.S. Gasoline Prices.” With the latest increase in gas prices, ASP decided to update the paper to reflect changes in the market.
This paper examines the causes of America’s soaring gasoline prices. The paper underscores that the price of gas is intimately interconnected with crude oil prices, which are set by global markets. The paper cautions that although America’s oil production has surged in recent years, it has not lowered gas prices.
Instead, our dependence on oil leaves us vulnerable to price swings due to geopolitical events around the world. America cannot look for short-term solutions to what is a clear long-term problem. America is critically dependent upon oil for its economic well-being and the only solutions are long-term methods to reduce the amount of oil we use across the country.
In brief:
- Gasoline prices are very closely correlated with the price of crude oil.
- Oil prices, in turn, are tied to events largely outside of America’s control.
- Oil prices depend on the interplay of supply, demand, and the perception of future changes in supply or demand.
- The only way to reduce our vulnerability to spikes in oil prices is to use less of it
- We cannot “drill our way” out of this challenge
Cause and Effect – US Gasoline Prices 2013 by The American Security Project
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