Gas Price in USA (Solution)

Gas Price in USA (Solution)

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Introduction

Perhaps there exists no domestic issue that frustrates and challenges every American daily more than the increasing cost of gas. This is especially because the cost of fuel has a direct impact on almost every person and aspect of the economy, from small businesses to multinational corporations. Unfortunately, there has been a common misconception that American-based oil companies or even local gas station owners have a hand in the price that one pays for fuel. However, these parties have extremely little roles to play in the price of oil or gas.

Quite a number of forces are involved in the determination of the price of oil. These include the decreasing value of the American dollar relative to leading world currencies, the Middle East unrest, financial problems in Europe, as well as the sharp increase in oil demand from India and China (Jacobe, 2012). This is because oil is not only a commodity but also an investment vehicle. In this case, it creates speculation, which many not be resulting from demand or supply of oil in the short term. Speculation affects the pricing of gas in the international market, as well as the global economy’s condition. The price of gas responds to the international oil price, which in turn reflects the global economy’s health, as well as the speculation in the world pertaining to the future supply of oil and gasoline. In addition, it reflects the willingness of Americans to tolerate increased oil prices (Jacobe, 2012).

While the problem of oil prices cannot be mitigated with simplistic solutions, there exists quite a number of solutions that may salvage the situation. These solutions should aim at taking control of speculation that triggers the increase in oil prices. It is noteworthy that, while the demand and supply may not necessarily be the culprit, it has a stake in the speculation. In essence, the solutions should aim at controlling these forces so as to control speculation.

First, America should expand its domestic energy production. This solution would include an increase in the issuance of offshore oil leases in places that are open for oil production, such as the Gulf of Mexico. On the same note, the government should allow the proposed Keystone XL pipeline to be installed. It is worth noting that the pipeline can bring an extra 750,000 barrels of gasoline from Canada to United States refineries when operating at full capacity (Cassidy, 2012). The validity of this solution rests on the fact that, contrary to what many people believe, a large percentage of the United States’ oil imports come from Canada rather than the Middle East. In this case, the development of the Keystone XL pipeline would not only strengthen the relationship with Canada but also provide the United States with sufficient supply of gasoline (Cassidy, 2012). As a bonus, the process of establishing the pipeline would create numerous jobs for Americans. An increase in the domestic production of oil would ensure that the United States has sufficient stock of oil, and reduce the effect of unrest in the Middle East on oil and gas prices in America. This is also cemented by the increased importation of oil from relatively stable countries such as Canada, which would allow for the stabilization of prices not only in the short term but also in the near future. Secondly, the United States should increase its investment in renewable sources of energy. As much as an increase in the production of oil would be imperative in the present so as to stabilize oil prices, it is noteworthy that these resources are becoming depleted at an extremely high rate (Frum, 2012). In essence, they cannot be depended upon in the long term in which case looking for renewable sources of energy including wind energy, solar energy and others would be imperative.

These solutions come with an element of easy implementation. As many would argue, investing in electric cars is preferable as they do not consume oil, unlike the contemporary oil vehicles. However, it is worth noting that the absorption of these vehicles has been extremely constricted. This is because the cars are limited as concerning the distance they can travel before they need recharging, which in itself takes a lot of time. In essence, convincing people to take these cars may take ages, in which case the oil price dilemma would not be resolved as fast as required (Frum, 2012). The actions proposed here would only need the approval of the government, which is not only easy but also quick to implement once approved. In any case, the problem cannot be resolved using a singular strategy but a comprehensive combination of strategies aimed at curbing speculation. It would be absurd to convince people to spend some more money on buying electric cars, while they are trying to cut expenditure as a result of increase in oil prices.

In conclusion, the increase in oil prices is arguably the most contentious problem in the United States, affecting almost every household. This problem mainly occurs as a result of speculation, rather than changes in demand and supply. In essence, the solutions should target the elimination of this speculation. This should be through the establishment of the Keystone XL pipeline from Canada to the United States. This would increase oil supply in the country, especially when coupled with increased domestic oil production. In addition, the government should increase its investment in renewable sources of energy.

References

Jacobe, D. (2012). The Solution to High Gas Prices. Gallup Business Journal. Web retrieved 5th June 2012 from HYPERLINK “http://businessjournal.gallup.com/content/148013/solution-high-gas-prices.aspx” http://businessjournal.gallup.com/content/148013/solution-high-gas-prices.aspx

Frum, D, (2012). The Answer to Rising Gas Prices? Better Consumer Choice. The Huffington Post: Business Canada

Cassidy, B. (2012). Solutions to high gas prices are within reach. Greater New Orleans