Friday, April 01, 2011

Does Unrest in Other Countries Equal High Gas Prices

Gas prices are rising because of the turmoil in Libya. According to the Department of Energy Libya exports 85% of its oil to Europe and only exports about 3% of its oil to the U.S. However, since Russia provides us with oil which is obtained from Libya we are affected. Luckily Russia is only the 13th provider of oil to the U.S. The top ten countries that export oil to the U.S. are Canada, Mexico, Saudia Arabia, Nigeria, Venezuela, Iraq, Algeria, Columbia, Angola and Brazil.

The war in Libya affects the oil market and many foreign countries are nervous as well as investors and oil companies who fear that wars will erupt in other foreign countries that supply oil to the U.S. The war in Libya has stopped production of approximately 2% of the world supply. Saudia Arabia has increased production since the war began to help with demand.

Unrest in the Middle East and other African countries such as Saudia Arabia, Iraq, Algeria, Angola, and Kuwait that supply oil to the U.S. has also contributed to the increase in gas prices.

The U.S. consumes only 25% of the world oil supply. If the war in Libya continues and oil production remains halted, Europe and other countries would have to get their oil supply from other countries which will result in an increase demand which results in higher gas prices for the world.

There are other factors that contribute to higher gas prices. Some gas stations are forced contractually to raise their prices as soon as oil companies raise their prices. Some gas stations owners anticipate prices will rise and raise their prices in advance to prevent losing money in the future.

Another factor that contributes to high gas prices is the value of the U.S. dollar usually caused by a bad economy indicated by high unemployment rates and lowering of the interest rates by the federal government. When the value of the U.S. dollar decreases, foreign countries can get more for one U.S. dollar. As people in other countries buy more gas, the demand continues to increase which drives up the gas price. All we can do is hope that wars in the Middle East and African countries stops soon.

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