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April 24th, 2008
08:00 AM ET

Crude awakening: Why gas prices are so high

Darius Walker
CNN New York Bureau Chief

In case you've been wondering why gasoline prices are hitting daily record highs, and have shot up 68 cents in the past year alone, here's a breakneck look at why:
[cnn-photo-caption image= http://i.cdn.turner.com/cnn/2008/images/04/23/art.gas2.jpg%5D

  • The biggest factor, of course: the rocketing price of crude oil.
  • Refineries, some still damaged by Hurricane Katrina, are maxxed out, and no new refineries planned in the immediate future.
  • Some investors are betting that the price of crude oil will continue to rise, driving the price up further.
  • The U.S. subsidizing, promoting and even mandating corn-based ethanol is spiking the prices of corn, ethanol and the gasoline it's added to.
  • Gas stations are basing prices not on today's cost, but on how much they anticipate it will cost to refill their tanks later.
  • The dollar's weakness against other currencies means you need more of them to buy foreign oil.
  • Increased global demand, especially from China, pushes up prices further.
  • And, of course, it's the time of year. Oil companies have to switch to a more expensive blend of gasoline for the summer.

Thinking of traveling? How does the back porch sound right about now?

Program Note: Watch issues affecting your life, home and wallet; Issue #1, today 12 p.m. ET on CNN
Editor's Note:
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Filed under: Gas Prices • Oil
soundoff (29 Responses)
  1. Kevin, New Bedford, MA

    Wow only 27 comments. I guess this isn't verry important as most people must be wealthy. With gass prices going up so will the cost of everyday items. At this rate 5.00 a gallon is possible by summer. The excuses don't add up. Clinton, Mcain and Obama should thank us everytime they fill up since we pay for them to do so.

    April 24, 2008 at 11:38 pm |
  2. xtina, chicago IL

    it cracks me up that people will not blink at the price of Starbucks coffee; so a styrofoam cup of coffee for $3.75 or a gallon of gas for $3.75, which is the better deal? I AM annoyed at paying $3.75 /gal. but Im not letting it ruin my life.

    April 24, 2008 at 11:10 pm |
  3. Ashley; Maurepas, Louisiana

    And MCain thinks gas isn't high........$3.65?

    April 24, 2008 at 10:29 pm |
  4. Marie Rose; Maryland

    The price of gas has gone up about $2/gal since I started driving... and I'm only 24. I think this is a new definition of ridiculous.

    April 24, 2008 at 9:23 pm |
  5. A.M. Deist

    Gas prices are high because we are occupying the Middle East. Stay there and they will continue to rise until the pain becomes so unbearable that we have to leave for self-preservation.

    April 24, 2008 at 7:18 pm |
  6. Duane

    Commodity prices are influenced by the same forces that control prices of stocks, bonds,and ETF's on Wall St. The balance between buyers and sellers, regardless what country they are from, will control the commodity prices through Wall Street. Oil is not excluded from this phenomanon. If I was from Saudia Arabia, and was setting on more money than I knew what to do with, I would be driving up the price of oil by buying it in the commodities market, and selling it again, at a higher price, profiting twice on the same oil.

    April 24, 2008 at 6:08 pm |
  7. brian ohio

    Geez they even have you believing it,they are making record PROFITS-thats why gas is high greed.yes these other things add to it but what 50 cents a gallon if your pushing it.Do your math!!!!!!!!!!!!!!Im tierd of hearing all this crying about gas prices and how Bush and Cheney are collecting thier retirement fund.If everyone would stand up quit driving and say screw work,I bet it would be down to under 2 bucks a gallon in a week!!!!!!!!!!!!!!!!!!!!!!!

    April 24, 2008 at 5:34 pm |
  8. gail welsh

    Why isn't there an investigation as to why the oil companies are making billions in profits and we are paying almost $4 per gallon?

    April 24, 2008 at 5:20 pm |
  9. Matt

    Americans, get over the high gas prices! They are never going to come back down for all of the reasons mentioned above, not to mention it is also costing oil companies more for oil exploration and drilling. As large oil fields start to decline, more expensive methods are required to tap into other resources like oil mixed in with sand flats in Canada. Oil companies are smart and they are testing our limits on our perceived value of this commodity. If we are willing to pay $3.50 without a decline in demand, they will charge $3.50. They'll try $4.00 by summer and we'll pay $4.00 because there are not enough alternatives to decrease the demand. Last time I checked, which was yesterday morning on the commute to work, the prices are not high enough because everyone is still going 75mph, still driving monster trucks, and every vehicle I saw had one passenger, the driver. We've brought our reliance on gasoline to ourselves by leaving sprawl unchecked and snubbing land management because we think we have so much space. What you need to do is live in Europe for six years to get a different appreciation. How about paying $8.00 a gallon for gas and land management policies that promote zoning of residential and commercial areas so they compliment public transportation and car pooling. Our problem is that we build unchecked neighborhoods 50 miles from dieing city centers and allow strip malls and businesses to build anywhere. Some of you have probably thought about public transportation or car pooling, but it is too hard because we did not consolidate living areas and commercial areas. What about employers posting information on where employees live to promote car pooling? Go to any German town. Everyone lives within the town in a much smaller space. All businesses are consolidated somewhere on the edge of town with mandatory public trans connecting them. Germany has to do this because 80 million people living in the space of Minnesota and Wisconsin is the same as 1.2 billion Chinese squeezed into the lower 48 states. We are headed in this direction and we can not continue to manage our land, which impacts our reliance on oil, like it is 1920 and everyone lives on a farm.

    April 24, 2008 at 4:55 pm |
  10. John OB

    At what point do our elected officials take some action to help the general public with the runaway train called rising fuel prices? The "mortage" crisis has prompted the Govt to bail out the banks....but what about those losing their homes? When will our elected officials do something for us the people? Does anyone else see the tragic ripple effect of out of control gas prices has on every other part of our economy? Cut back on driving, sure...that means no extra driving at nite and weekends, but we still need to get to work. Since Bush was put into office gas prices have tripled and have doubled in just 4 years. Anyone still wondering why the US and worldwide economies are on the verge of collapse. Speak up now demand action from your elected leaders!

    April 24, 2008 at 4:49 pm |
  11. xtina, chicago IL

    why don't we hear Americans supporting John McCain's idea to cut the federal government's piece of the "pie" from Memorial Day to Labor Day?! That's an avg. of 50 cents per gallon that could be immediately taken off your price for a gal. of gasoline- makes sense to me.

    April 24, 2008 at 4:23 pm |
  12. Charles

    We can complain until we wear ourselves out complaining. The truth is, we have gotten into a situation where we have no choice but to pay the price.

    April 24, 2008 at 3:17 pm |
  13. Twitter

    boy, you need to do a better job at this. The biggest question is why crude oil has tripled since Bush came to power! Oh, blame China, wait, but China was importing about 7% of world's oil last year and the forecast is about 8% this year, while crude oil price has grown from $70 to 110$ level. Not really make sense,eh? And OUR economy is in RECESSION! Going back to supply and demand, who is actually DEMANDING? That's your job to find out!

    April 24, 2008 at 2:19 pm |
  14. GARY

    I HAVE NOT READ UP ON ALL OF THE INFORMATION REGARDING WHY GAS IS GOING UP BUT I LISTEN TO THE NEWS AND AM HEARING DISPITE THE RISING COST OF CRUDE OIL THE OIL COMPANYS ARE MAKING MORE PROFIT THAN THEY HAVE EVER MADE.
    IF MICROSOFT,IBM AND THE BELL SYSTEM HAD TO ANSWER TO THE GOVERNMENT BECAUSE THEY WERE GETTING TO BIG WHY IS THE GOVERNMENT LETTING THE OIL COMPANYS DO THIS TO THE ECONOMY. I HAVE HEARD THAT DIESEL FUEL IS A BY PRODUCT OF GAS AND IS THE EASIEST TO REFINE. WHY IS THE COST OF DIESEL FUEL GOING HIGHER THAN GAS.

    April 24, 2008 at 2:10 pm |
  15. Chris - Hemet, Ca.

    Let me see if I have this right Anderson. In 2007 oil companies paid record high prices for a barrel of crude, therefore it cost them more to do business. At the same time oil companies had record profits at the end of the year. There is something about this, having to do with logic and common sense, that doesn't resonate well in my feeble brain.

    April 24, 2008 at 1:49 pm |
  16. Genevieve M, TX

    The gas prices do not affect me much because I set aside more money for car expenses each month than I really need- leaving extra in the bank, just in case. I spend about $250 per month on gas for 3 cars. It is considered a low amount for where I live. I have read in the local paper that some people only have two cars and they spend $400 or more on gas.

    I really think that how much you spend on gas depends on what car you drive, car mantenance and how you drive. My daily car is a Toyota Corolla, my fun cars are a Ford Taurus and a MB E350. The cars average (city) MPG is 20-30. The Taurus being on the lower end at 20. Many people I know buy huge cars such as SUVs and the amount of gas one of those use can easily fuel two of my cars for the same time period. I also keep up with maintenence on the cars to keep the engines running top notch. As for driving, I avoid high speeds (esp on highway), jack rabbit starts, and sudden braking as much as possible.

    April 24, 2008 at 1:20 pm |
  17. Tammy

    I refuse to be held hostage by this. Think I'm taking a flight across country (or to Central America) or both this summer. I'll cut out other fluff spending somewhere. The thought of not travelling is suffocating in and of itself. Besides that, I live in Louisiana, and the oil and gas industry has been and is good for the economy of my community and family.

    April 24, 2008 at 12:35 pm |
  18. JC - Kansas

    Why gas prices are so high, a queation we have been asking off and on for the past 7 yearsor so of constant increase. First off what really happened in Cheney's closed door session with the Oil Industry as they mapped out the energy policies of the Bush administration, we will never know, executive privilegde, after all they might not offer their unbiasis candore if what was said in the meeting was made public.

    Refineries are damaged and maxed out, but there are no shortages, no lines, no rationing, no attempts by the administration or Congress for that matter to speed up repair, or expansion of existing refineries. No reductions in speed limits no matter of conservation other than the consumer being squeezed for every penney they can.

    The free market with increased demand has driven up the cost of oil, refineries are operating on a bare margin barely making enough to stay open, but who owns the refineries, who owns the oil. Why the Oil Companies, so who is profiting with prices being driven up, who profits even more if the impression is of shortages, why the oil companies. After all its still a supply and demad market place, they have the supply and can demand what ever they can get for it, at everyone elses expense I might say.

    A weak dollar, why should someone invest in the dollar. This administration simply prints more money like it own the copyright on the trees being used for the paper. A surplus turned into the largest deficient in the nations history, interests rates so low that saving actually cost you money because it loses value in the bank. This in turn drives up the price of a barrel of oil and everything else that is around us.

    Bio fuels are a great way to go, but what has the administration done to further the development of non-grain bio fuels. Nothing, it is easier to take food production and convert it into energy, naturally however while it sounds good on paper, grains may be economical for the production of drinking alcohol, but there are better plants out there for the production of fuel. But we are lacking in the technology requires for the conversion of the grasses to alcohol. Wheres the federal programs to delelop this commodity.

    While prices were destined to increase, this administration has done nothing to lessen the blow or off set the crisis that it has manifested.

    Why are oil prices so high, look to 1600 Penn Ave, Washington DC and you will see two Texas oilmen sitting there that have done everything possible to insure that the oil industry has been well represented for the past 71/2 years. Why are oil prices so high, I blame George W Bush and Dick Cheney and their failed administration.

    April 24, 2008 at 12:33 pm |
  19. dr, AK

    *And, of course, it’s the time of year. Oil companies have to switch to a more expensive blend of gasoline for the summer. *

    Is this a joke?

    April 24, 2008 at 12:14 pm |
  20. Sharon

    None of these reasons are valid. The only valid reasons are greed, gouging, greed and gouging. I taught economics for 10 years. Gasoline is a product for which there are no substitutes and people cannot simply do without, ergo it is immune to the laws of supply and demand.

    I don't understand why no one is suspicious of the predictions that have been put out there for almost three months now. $4.00 a gallon gas!! I heard an economist pontificate the other day that as soon as gas gets to $4.00 a gallon, people will finally start to cut back. They have tried to BUSH wack us with the pre-acceptance of greed.

    People have been cutting back for months to no avail. The prices keep skyrocking for all items both essential and frivolous. Soon, the economy will be in even worse circumstances than it is today. We have to remember, that no matter how pooly the economy functions, the oil people will always have exactly everything they want and need.

    I am very tired of being a pawn in some one else's chess game.

    I wish CNN and all the others who simply mouth the platitudes of the oil companies would engage in some independant thinking and investigation. It is a noble cause.

    April 24, 2008 at 11:45 am |
  21. Renee

    I think I am more concerned about the price of commodities right now than gas. Food costs are soaring. I just read Sam's Club is limiting the amount of rice a person can purchase. I read on another news source that the global food issue is a "silent tsunami." I have to say that about make me ill knowing the amount of food is becoming more and more limited world-wide. Glen Beck has radio show broadcast and a guy called in and said he and his wife were using their economic stimulus money ($600) to purchase MRE's. I was a little blown away when he said this. Then he went on to explain as a Vet he has eaten them several times and they bring them hiking and camping.

    With regards to gas, I had to laugh at a 360 blog post from you all. The editor wrote something about taking the bus. This is the problem in America. Most of the country does not have public transportation. While I do ride public transportation in NYC and DC and walk all over in many other areas of the country you can't find the MARTA to the airport like you can in Atlanta. Nor can you find a train like in Boston or Chicago. We don't Amtrack in our area of Florida so we are forced to use private cars or ride our bikes. No buses here for most of us. Well, maybe at this time of the year I do see the Hampton Jitney on I-75 making its way back to Long Island with retirees and their Caddys in tow.

    April 24, 2008 at 11:41 am |
  22. Tina

    I remember freaking out over $2.OO a Gallon! You know what I mean. It has been going up at such a steady fast state. Have you noticed how many motorcycles are on the highways? But, even then it's groups and they are not saving by going in groups, I wouldn't think.

    Do you keep your old model or trade it in for a new model? I want a new vehicle , but I have the feeling it's a wrong move. It will just sit there or I will show it off and go in debt by filling it up. On the other hand, it will get better performance. Hmmm.

    April 24, 2008 at 11:27 am |
  23. thasan/ohio

    3.59 and climbing here. if i didnt have kids to lug around I'd ride my bike to work

    April 24, 2008 at 10:08 am |
  24. Len Moses

    The oil prices are high because of corporate greed. Americans have been cutting back drastically on fuel comsumption. I personally have cut back by 50 percent. The oil companies will continue to raise prices at the pump to maintain their profit levels...The greatest miscarriage of justice was legislation allowing oil companies to pass price increases S T R A I G H T to the pump (a bonanza for the oil companies). They were allowed to charge new prices to old inventories. Perhaps, Congress rescind this lobbyist based legislation.

    April 24, 2008 at 9:51 am |
  25. ashley

    gas prices are so high because we have to get our oil from overseas, even though we could be getting it from right here in the states ( other than alaska)

    April 24, 2008 at 9:46 am |
  26. Annie Kate

    Well the back porch would sound lovely except we have to travel up to Tennessee and attend my daughters wedding – she may never speak to me again if I dare to let ill health, the horrible cost of gasoline, or even death keep me from attending. Kids and their expectations!

    At the prices gas are at maybe we will all stay home and get acquainted with our neighbors who are also staying home!

    Annie Kate
    Birmingham AL

    April 24, 2008 at 8:53 am |
  27. Michael, NC

    It REALLY frustrates me to no end to have to get ripped off weekly when pumping gas into my car. To see the price on that pump go past 40 dollars makes my blood boil. Thank God I have a bike that I can ride to campus, or else I would be kicked out of my apartments and have my car repo'd because I wouldn't be able to pay it off! It's ridiculous. The government should give us all money to buy a motorcycle that will get 50 to the gallon. Then I'd be happy! 🙂

    April 24, 2008 at 8:46 am |
  28. RT

    This summer were staying real close to home.

    April 24, 2008 at 8:39 am |
  29. fred

    the groverment is why gas is so high the state and the fed. but no one cares about the people . unless you live in another country.

    April 24, 2008 at 8:24 am |