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Due to the petroleum industry imminent despise, it is crucial that other sources of energy begin to be utilized. It is not uncommon to see specials on television, or inserts in magazines, profiling cars that run on electric, batteries and solar power. Not only are these options needed for their alternative power options, but also for the environment. The U.S. government states that over 100 million Americans live in areas that failed at least one National Ambient Air Quality Standard. When a new car is produced, it must meet federal emissions standards. But as vehicles get older, the amount of pollution they produce increases. Hence, the invention of the zero emissions automobile. Also, vehicles with better fuel economy have been proven to produce less pollution over time. Many automobile manufactures take this into consideration when marketing their new vehicles that may get 30 miles per gallon verses 20. Many consumers are swayed by the fact that purchasing a certain vehicle may be helping the environment, not just saving on gas money.

But what does OPEC, oil production levels in the Middle East, the U.S. dependence on gasoline, environmental concerns and new technology have to do with the price of a gallon of gas at my local gas station? And which factor is the determining one? As I found out early in my research, it is not just ONE thing, it is a specific, and often varying combination.

The most basic concept is that gasoline prices are directly reflected by the price of the crude oil, the main ingredient. The price of crude oil in influenced by the decisions made by the producers, particularly which prices they are willing to sell and the quantities they are willing and able to supply. Low prices of crude oil can be caused by a number of factors. Generally, it is an imbalance of supply and demand. If oil production rises faster than demand, then prices can fall and all of the oil producers will suffer. Consumers can also suffer if the oil industry is unprofitable and discourages investors. High prices of crude oil are usually due to a shortage of oil supplies. Crude oil prices react to the balance of supply and demand in the short term, and the rate of investment in the long term. If investment is not made far enough in advance, oil supplies could be limited in the long term, thus raising prices.

But, perhaps, the one reason that gas prices rise and fall has nothing to do with competition, the price of crude oil, or a war in the Middle East. Gasoline, the finished product that consumers purchase, if affected heavily by taxation. In some countries, consumers pay five times the amount that was paid for the original crude oil. Taxes account for 70 percent or more of the final price of oil products in some countries. This enables the oil consuming countries to receive as much, if not more income than the oil producing countries. In 1996, the oil taxes in the US, Canada, Japan, Germany, Italy, Britain, and France accounted for $270 billion dollars. Consumers may barely notice even a major change in the price of crude oil.

Even though consumers may not like the constant change in gasoline prices at the pump, it is important that they are closely regulated. If gasoline is too expensive, than goods and services requiring that form of energy become more expensive, and the economy experiences inflation. Alternative forms of energy would also become more cost-competitive, but the oil producers would eventually increase their supplies and prices would go back down. If gasoline is inexpensive, consumers would tend to waste this limited natural resource. If prices are too low, supplies would eventually fall until there was a price shock, leading back to inflation. Like it or not, the cheap gas in the morning may be the most expensive on the block by the time rush hour is over.

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