Tuesday, May 24, 2011

Reducing Gasoline Prices

There are three components to the price of gasoline at the pump. The first is the price of oil. This is influenced by market speculators, and especially when oil is in short supply or when world events suggest that it might soon be in short supply, the speculators smell profits and bid up oil prices. The second ingredient is the refining cost/capacity, and barring shutdowns of refineries, this is fairly constant. The third factor is the relationship between supply of gasoline and the demand for it. Of these three ingredients to pricing, consumers can only affect the supply vs. demand relationship. If you want lower gasoline prices, there are two things you can do: (1) Drive fewer miles, and try to use the vehicle that gets the best mileage if you have a choice between two. (2) Don't fill up your tank all the way. As of 2007, there were 254.4 million cars in the United States. If each of those cars were filled to a point six gallons less than full, and half the available cars were "filled" at any given time, the country would require about 762 million fewer gallons of gasoline at any given time. Since gasoline weighs about 6 pounds per U.S. gallon, stopping the pump six gallons below full would mean that you wouldn't have to pay for fuel to carry the extra 36 pounds of gasoline around. On the government and marketplace level, anything that could be done to discourage speculators from bidding up prices unrealistically would help also.

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