An Introduction To Gas Prices
March 1, 2006
For the average person, gas prices have been a roller coaster ride. Over the years the price of gas has fluctuated so widely that consumers cannot count on the price to remain stable. The thirst for gas in the US can be gauged from the fact that the annual driving distance of 2.5 trillion miles per year for the US roughly equals to about 14,000 round trips to the sun. A whopping distance!
There are several other reasons for increase in prices of gas. Some parts of the US restrict the use of gasoline in order to meet stringent environmental standards since smog, generated by burning gasoline, accounts for maximum pollution. Producing a cleaner variety of gasoline is challenging and entails problems in refining, distribution and storage making it costlier. This translates to a high demand for gas.
Gas prices fluctuate rapidly. They vary remarkably from one country to another, and even within one country. A March 2005 estimate put Amsterdam in the Netherlands, as having the most expensive gas, at $6.48 per gallon. Oslo, Norway comes second, and Milan, Italy, is placed third in terms of having the most expensive gas. Amongst the places that have the cheapest price of gas, Caracas, Venezuela tops the list with a recorded price of $0.12 per gallon, followed by Lagos, Nigeria, at $0.38 and Cairo, Egypt, at $0.65.
Gas industry professionals use several tools to keep track of the wide fluctuation in gas prices. They use instruments such as price history to analyze future prices. While calculating future prices, gas professionals also take into account the role of the weather, since it plays an important role in the price of gas. The recent case of high gas prices in the US in October 2005, for example, throws light on the volatile gas pricing scenario.
The US recorded a high gas price all throughout the summer, when the prices jumped further due to Hurricane Katrina, which shut down significant natural gas production facilities around New Orleans. This was quite unexpected and beyond the prediction of gas market analysts.
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