Graph 1
Many Americans nowadays look at what affects their wallets directly instead of what is happening globally to affect economic changes like gas prices.
While Americans normally just look at gas prices and then blame the president many factors go into how it is priced. Below is an image from the U.S. Energy Information Administration (EIA).
(Graph 1)
As you can see this little diagram shows the different things that affect the cost of gas for how much it cost companies to refine it, sent it, and then pump it into your car. Those top three parts make up 46.4% of the tank on the right. While this is a massive cost it comes from different activities which are the refining process and the distribution and marketing of it. The largest comes from getting the oil, while it is true that we have many oil reserves in Alaska and Texas as the more notably known ones. Much of the oil that we get according to EIA is shown below.
As you can see most of the oil, we get comes from our neighbors Canada at roughly 52%, and Mexico at 11% with only a small amount of our oil coming from Saudi Arabia, Russian, and Colombia. You might be sitting there wondering why gas prices have gone up if the ease of import from Canada and Mexico is easy and that's where a majority of it comes from then why is it that gas has gone up? Well, you must remember that we are not the only country buying oil from these places and the ability of those countries to produce more oil causes a strain which then causes prices to go up. Basically, the highest bidder wins on the world stage.
These percentages mean barrels of oil being sold shipped months in advance before they even hit the shores of America, but we don't stop producing oil once the barrels are filled, they must keep going, and with each new barrel comes a price depending on what is happening around the world.
This past year we have seen a massive rise in the price of everything, especially in our grocery stores. And this past month we have seen a rapid rise in the price of gas.
Many economists stated that this rise was to be accepted with the rise of people traveling again, and a war going on in Ukraine. Below is a graph of the average price of gas in the Commonwealth of Virginia from 2005 to 2021. (Adjusted for inflation)
(Graph 2)
While it is difficult to read with everything looking all jumbled together the focus of this graph is the red, yellow, orange, and green lines. Two highlighted parts of this graph show events that shaped that year. The 2008 financial crisis that hit the world is what created a massive price increase, and then in 2020 where we saw a massive decline in prices because of a global quarantine due to COVID-19. These events shaped the prices of that year but looking between 2011 and 2015 we see a rise and then a leveling off, leaving prices staying relatively the same and then dropping, this is due to more production in the U.S., Canada, and OPEC.
Although the current price hikes on everything have made many Americans think back to the prices of 2008 when it comes to gas prices in particular the rise is not equal to that of the prices in 2008. While the price of gas nationally hit $4.144 per gallon in 2008 adjusted for inflation would be around $5.37 per gallon.
Suffice it to say that if you start to really think about what goes into the simplest things, we use daily have a very long complex history of how it was made.
Graph 2
