Gasoline Essay Research Paper The price of

Gasoline Essay, Research Paper

The price of gasoline is a major interest to almost everyone in the country and almost everywhere in the world. It seems that every month or even more frequently, gas prices are either rising or dropping but never staying stable. Gasoline prices are affected by many factors, including the price of crude oil in the world market, supply and demand for gasoline, local market competition, temporary supply interruptions, government regulations, or taxes.Gasoline is produced by a distillation process where crude oil is heated and fumes are captured and converted into many products such as kerosene, jet fuel, and gasoline to name a few. Therefore the price of crude oil, which is extracted from oil wells beneath the earth s surface, is a major factor in gas prices. The five leading oil producing countries and their approximate shares of the world supply of oil are: Soviet Union 21%, Saudi Arabia 17%, The United States 15%, Venezuela 4%, and Mexico 4%. These five countries made up 61% of the worlds oil production back in 1980. Even though the United States is a major producer of oil, it does not make them self-sufficient. The United States uses more oil than they can produce and must look toward foreign countries. Therefore, the United States is forced to deal with an organization called O.P.E.C. The reason the United States goes through O.P.E.C., is not only in its own interests, but also in the interests of its allies and in the interest of maintaining world peace. O.P.E.C. which stands for Organization of Petroleum Exporting Countries, is made up of 13 countries: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, and Gabon. It controls approximately four fifths of the worlds oil reserves in the non-Communist world. O.P.E.C. was founded in Baghdad, Iraq in September of 1960. The headquarters were initially set in Geneva, but were later moved to Vienna in 1965. O.P.E.C. was organized in response to oil producing countries that did not consult with the Middle Eastern oil states before lowering their crude oil prices. The producers feared that other countries would establish monopolies. The aim of O.P.E.C. was to create a universal price between the countries, in order to ensure peace between oil producers throughout the world. O.P.E.C. also wanted to provide its members with technical and economic support in times of need, since not all the countries were completely stable. Even though the goal of O.P.E.C. was to establish firmly unified prices among their members, the organization was not always successful. In their quest for control over the world market of oil production, they have run into several obstacles and setbacks.O.P.E.C. has barely survived due to internal conflicts among its members. Since O.P.E.C. almost has a complete hold on the worlds oil supply, the United States is extremely concerned with the areas instability. The Middle East and the Persian Gulf area, where most of the members are located, are extremely prone to wars, both civil and cross borders. They are often plagued by religious battles and positions of power are frequently overthrown, making it hard for any stability to come out of the area. Anytime there is chaos in the Middle East, the United States thinks back on “… memories of other troubles in the Persian Gulf area: the Arab oil embargo in 197374, the Iranian revolution in 197980 and Saddam Hussein s invasion of Kuwait in 1990″ (Hancock 53). The area is also vital to our allies, who would be crippled without Gulf oil, whose livelihood we are dependent on. In 1973, O.P.E.C. raised oil prices 70%. “The dominant Middle Eastern members of O.P.E.C. used succeeding price increases as a political weapon. They aimed it at Western nations in retaliation for their support of Israel against its Arab neighbors in the so-called Yom Kippur War of October 1973. They accordingly raised prices another 130% at the Tehran Conference of December 1973, and a temporary embargo was placed on the United States and the Netherlands simultaneously. “Other price increases followed in 1975, 1977, 1979, and 1980, which ultimately raised the price of a barrel of crude oil in The United States from $3.00 in 1973 to $30.00 in 1980″ (Glasner 107). Almost every college student has heard stories from friends or relatives about the gas crunch in the 1970 s. People waited in lines that stretched for miles, and could only get gas on certain days depending on the first letter of your last name. O.P.E.C. used the money they raised to invest in other countries, placed in foreign banks, currency markets, and to help their own economies through inner development. O.P.E.C. is also extremely interested in maximizing profits, but in such a cartel, finding a price that will maximize profits is impossible. O.P.E.C. has attempted to raise prices several times by cutting production. According to economic theory, a decrease in supply will yield higher prices. These are some of the reasons the United States must offer stability and continue to have troops in the area. They must intervene when the worlds oil and its prices are in jeopardy.Currently crude oil prices are rising due to the bombings in Saudi Arabia. “It has continued to soar, to more than $24 a barrel, up 34% from one year ago, the highest level since the 1991 Persian Gulf War” (Borenstein 49). O.P.E.C. has contributed this increase to several