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As many of you travel back from your Easter break destinations you may be wondering why gas has become so expensive. Planet Money has one idea why. How is OPEC able to keep prices high? Using a supply and demand graph, could you show this? Is limiting the amount supplied really a profit maximizing decision? When producers in America and elsewhere make a push to increase production, would you say that decreasing oil production is OPEC's "best response?"
R10371553
4/10/2012 02:12:04 pm
Why do we pay so much for gas when it only takes $2 do produce a barrel? Because we need it. This makes complete sense. If you can only get a product from a limited number of people and it is necessity for our society the prices surely will be high. If we did not rely on gas so much gas prices would decrease, but since we do, oil producers are going to do what they have to to maximize their profits.
R10433679
4/12/2012 12:49:31 pm
I have to strongly agree with your statement because I believe that us Americans will pay any amount of money for something we need. As long as we need something from somebody else we will pay any amount to get what we need.
Jamal
4/12/2012 04:35:39 pm
What you both say is something that is true that keeps the american system working. If you can restrict something to a point people will pay whatever is required. If you look it up cars making 100 mpg were developed more than 50 years ago but the people developing the technology was killed and it was lost. They don't look at it as it's only $2 per barrel we can make it cheap, they look at it as it's only $2 per barrel if we charge $5 we can make so much more.
10316907
4/12/2012 10:23:16 pm
I agree with you the Middle East has most of the control now ofgasoline even though we tried to take control (aka Iraq War) so since we have to buy gas over international waters the distributors that. Sell it here want to maximize their profit as much as possible.
R01956770
4/13/2012 12:59:26 am
I agree, the oil companies do exactly what anyone would do in their position
R#10424321
4/11/2012 02:01:06 am
It makes sense that they can charge however much they want to for oil. Oil is a necessity for the U.S. and if there is only one main source for it then the people providing it can charge however much they want because Americans will have to buy it no matter what price it is set as.
R10440115
4/11/2012 05:35:21 am
Although, what you said does make sense in the way of supply and demand, we could somewhat improve our circumstances through U.S. drilling. Obviously this article is pushing "alternative energy" sources as the solution to our oil problems, but I'm not fully buying it when they said, "No amount of U.S. drilling or efficiency measures will change" the problems we have with OPEC. We, as a country, do not have the means to be investing billions in alternative energy sources that produce little to no useful results. Right now, in my opinion, our best option would be to look towards more U.S. drilling.
R10425881
4/11/2012 05:32:08 pm
I agree with what you said, OPEC nations monopolize the Oil market and can produce enough to make money to satisfy the needs of their citizens
Matt Huebert
4/12/2012 04:11:25 pm
This is basically true for the short run, looking forward 10,20,50 years, oil will become less essential to the global population.
#R10465114
4/11/2012 09:05:58 am
With the economic problems in the US today, it would be interesting to know if discussing oil availability and pricing is a regular mention in conversations with OPEC countries. Are the governments affected by the high prices concerned by the state of affairs enough to bring it to the fore, or has the US and other countries assumed the conversation is either pointless or ultimately against best interest considering the already tense politics in the middle east?
10413789
4/12/2012 07:16:46 am
I think the conversation is pointless. There isn't much talking can do now.
R10453152
4/11/2012 09:54:50 pm
The reason we pay so much for oil is because it is a necessity to Americans life's. All of the tree huggers don't want us drilling in the places that could potentially harvest massive amounts of oil, so until that happens we will continue to pay large sums of money to import it from other countries.
R10441603
4/12/2012 04:32:00 am
I am in agreement with this one. People have spoke, and some know that there is oil in the US soil, but we can not drill here because of those tree huggers. We will continue to pay for the oil barrels that much until we do drill on our own land. So instead of the US people griping about this why don't we do something about it?
R10462776
4/12/2012 12:18:06 pm
I would also Like to add that the EPA requirements on new vehicles are hurting gas mileage thus causing us to use more fuel. An example would be diesel motors..
10413789
4/12/2012 07:12:31 am
The difficult thing about Gas is that it will always have a high demand, because people have to have it in order to power their vehicles and be able to get around. Lowering supply will definitely raise the price on gas, but demand won't change too much. If the supply increases, people won't be as conscious about how much they drive if gas prices lower and more people will start to drive more than they would when prices were high. Regardless, gas is always going to be producing massive profits as long as vehicles continue to be the most popular form of transit.
R10407550
4/12/2012 07:59:20 am
We need oil for EVERYTHING. Even though there has been much progress in reducing oil use in the car industry we still need it for many more things. They know that we need so they are obviously going to charge alot for it so they can get more money. Don't we do that in the United States too. Some things cost pennies to make, but then it gets sold for 20 dollars. The same things happens here the oil situation is just heightened because of the large amount of oil we buy and the economic state of the countries we buy it from.
R10460329
4/12/2012 09:48:37 am
It makes sense to see gas prices increase all the time. Since we rely on it so much, there isn't anything stopping them from increasing the price, because it will always be a factor in daily lives.
R10390341
4/12/2012 10:38:29 am
I agree because no matter the prices, gas has to be used for everyday life in order to live. Gas prices being so unpredictable makes it scary since we rely so heavily on gas and have no quick option of fixing that.
R10175535
4/12/2012 10:58:41 am
Gas will always have a high demand due to the fact that people have to have it in order to power majority of their vehicles (cars, tractors, ATVs etc.) . Demand might falter but it will never change drasically due to the american dependence on oil. American will sacrifice more frivolous aspects of their lives way before sacrificing their transportaions.
Faith Ellid
4/12/2012 11:49:19 am
I find it amazing that we pay $105 dollars for a barrel of oil when it costs $2 to produce, obviously the oil industry is booming due to rediculously high demand for gas in the U.S., but is it really worth paying that much money for a barrel when we have alternatives for gas such as electric cars. We obviously need to invest in the production of more electric cars. Obviously your electricity bill might go up and its not a full proof option but its definitely something to put more money into to find out how better off Americans could potentially be.
R10409604
4/12/2012 12:59:29 pm
While OPEC has the monopoly over the oil, then they can keep charging as much as they want so that they maximize profit. Also, as long as the US is dependent on oil, then the prices will stay high. If we were able to drill in some of the places we are not able to at this time then the prices would drop, but since we are so dependent we can expect to still pay high prices for oil.
10469266
4/12/2012 01:25:15 pm
At this point, paying so much for oil is more of a scarcity type of thing it seems. Granted there is still quite a bit of oil left in the world, we've become completely aware that this finite amount is precious, and as with other life commodities it should be treated as such. Kind of like the idea that 'well, we don't have a lot of diamonds, lets charge more for them because of the scarcity..' situation.
Alfredo Galvan
4/12/2012 01:25:43 pm
Since we can't support our demand for oil, we are going to have to keep feeding the monster named "OPEC". And since Saudis are the biggest producers of oil, they make the rules. And until we come up with an efficient alternative for fuel, we are going to have to go by their rules.
R19363252
4/12/2012 11:37:54 pm
I think you got the point that everyone else is missing. We need to recognize that something can be done about this, bbut we have to bbe the ones that do it. We need to break our dependence on them and supply our own source of energy.
R10506939
4/12/2012 02:48:03 pm
The high prices of gas come from an increase in demand while supply decreases. This causes prices to spike an unforuntately this trend will continue to stretch the supply and demand graph until there is no longer any oil remaining. It is clear that oil is limited but demand is there because we rely so heavily on oil in our everyday lives.
matt huebert
4/12/2012 04:13:29 pm
I feel like for now it is the best thing they can do, not because it will make them the most money now, but because if they slow the rate of sale then the income will be coming in longer, the oil will eventually run out, why get rid of it all now, as it becomes more and more scarce the price will go up, it is wise to sit on it and let it appreciate, just like realestate
R10465652
4/12/2012 04:21:33 pm
Gas prices will continue to increase for Americans, while simultaneously supporting the monarchies that charge such high prices. Americans look for the President to just fix it, but he doesn't have the power. If Americans don't pay that paticular price for the oil, the prince of Saudi Arabia can't pay his citizens the subsidies and pensions he promised. Saudi Arabians do not pay income tax, the majority of Saudi Arabia's economy rests in the oil business.
10432816
4/12/2012 10:25:53 pm
Oil is a good that we all need so therefore it really doesnt matter what OPEC wants to charge for it because like insulin to someone who has diabetes we will spend however much they demand!
R10429661
4/12/2012 11:43:35 pm
Is the article it states that it only cost 2$ to produce a barrel of oil and they act surprised we pay so much when it doesn't take NYC to produce. Well when the demand of a product is I high demand and the supply is low it only makes sense to charge a lot of money because this they are the only ones that have it then they want to make as much money as possible.
R10429661
4/12/2012 11:45:07 pm
In the above post. It's suppose to say "much" not "NYC"
r01957330
4/12/2012 11:45:45 pm
Gas prices in my opinion will be back down to the high-middle twos in the winter. I feel like every spring and summer we go through this exact conversation about how gas will hit five dollars a gallon but it never does. 4/13/2012 12:08:08 am
It's alright, guys, those gul-durn money-suckin', God fearing American-abusing Mooslims'll be gettin' what they deserve when the Romneypocalypse starts and GOP-backed American drilling/fracking has destroyed the rest of America's fresh-water supply like in Pennsylvania, forced the already countless impoverished people into organized street gangs, and we literally start living Mad Max-style ... oh wait.
10375157
4/13/2012 12:21:47 am
With the technology we have in the 21 century it's a given that we are going to need oil. We can produce electric cars or try to find alternate solutions, but regardless we will always need oil. OPEC knows this, and they have the upper hand because they control our oil supply.
R10962697
4/13/2012 12:21:55 am
The U.S demand for oil will continue to be sky high, unless we find another source of energy. Gas prices could be put at 5 dollars a gallon and people will continue to buy because we need it. The demand is too high now
10480114
4/13/2012 12:33:17 am
OPEC's able to keep the prices high because people are willing to pay almost anything for oil. You could draw a supply/demand graph to show the changes in price per barrel with the current supply and one that is less restrictive. Like some of the comments before mine, in the short run this strategy will work to keep the peace for the Saudi economy. To keep the price of oil up, limiting OPEC's production would be the best strategy
R10363073
4/13/2012 12:45:44 am
To me, if something is needed, then people will pay higher prices to keep hat ever the product is. Since OPEC knows that, they keep higher prices.
Wesley
4/13/2012 12:57:31 am
Oil is an inelastic good, we need it. Until someone comes up with an alternative to it OPEC can essentially control the price. They are maximizing their production factors and making the most out of the situation. With no competition or substitutes prices will continue to rise.
R01956770
4/13/2012 01:00:40 am
I think oil companies have every right to charge high prices. It's a free market and people would buy less if they thought the prices were to high. Comments are closed.
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