Gas prices are now at the highest price they have been at this time of the year since 2008. On June 2, 2008, national gas prices hit a high of $3.976 a gallon. Three years later, the national average gas price is $3.794 a gallon. In cities like Chicago and Los Angeles, consumers are paying more than $4 per gallon for gas. Analysts attribute the prices to a number of problems, including dependence on oil, political instability, declining oil supply and extreme weather events. (Gas prices are influenced by more than supply and demand. Find out what determines the price you pay at the pump. Check out What Determines Gas Prices?)

6 Ways to Prepare for Rising Gas Prices - $5 Per Gallon Gas Coming Soon?
Top 10 Most Fuel Efficient Cars 2011 - Small & Cheap
Crude Oil Futures Trading 101 - What Are They and Should You Invest in Them?

TUTORIAL: Option Spread Strategies

Fortunately, high gas prices are not inevitable. With certain decisions and outcomes, the price of oil can be reduced. Here are some events that would help reduce the cost of oil.

1. Lifestyle Changes
To save money on gas, consumers can spend less time driving. Many people have requested that their employers allow them to work from home. People have also combined trips and have learned to prioritize their trips more. Using public transportation, carpooling, walking or bicycling to work can also reduce the amount of money spent on gas.


2. Improved Efficiency
Creating more fuel-efficient vehicles is one way to spend less on gas. Congress has been trying to increase vehicle efficiency standards, with the intent of keeping the demand for gasoline in check.

3. Oil Substitutes
As the demand for oil decreases, gas prices also decrease. Gas prices will go down when consumers find other sources of energy. Hybrid, solar, and hydrogen vehicles reduce consumer dependence on oil.

4. Political Relations
Nations that import oil are at the mercy of Oil Producing and Exporting Countries (OPEC). When importing nations are able to negotiate with OPEC, they are usually able to reduce the cost of importing oil.

5. Taxes Go Down
Taxes play a large role in the cost of gas. In fact, they are the biggest reason that gas prices fluctuate from state to state. If the state or federal governments lowered the tax on gasoline, the price could go down substantially. Unfortunately, this may be impossible in volatile economic situations when governments need more revenue.

6. New Supplies of Oil Are Found
When new oil supplies are located, the cost of oil can decrease significantly. Offshore drilling and finding new oil fields helps nations increase their oil supply and keep oil and gas prices in check. (Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why. See What Determines Oil Prices?)

7. Oil Companies Produce More Gas
Gasoline is only one of the many products that oil companies produce. Some economists have suggested to Congress that they pass laws to increase the amount of gasoline they produce.

8. Natural Disasters Eventually End
Floods, earthquakes, tornadoes and other natural disasters that have struck our world in the past few months have played a large role in the price of gas. Fortunately, these factors don't last forever. As we rebuild our lives, gas prices will eventually return to equilibrium.

The Bottom Line
It is also important to keep in mind what solutions will not help reduce gas prices. Many have suggested that boycotting the gas companies will help reduce gas prices. Unfortunately, this doesn't really work. One problem is that this only shifts the burden from one day to the next. Eventually consumers have to purchase gas again and they may have to pay more during times of increased demand.

High gas prices can be frustrating, but they are not inevitable. Fortunately, there are many factors which can help to get them under control. As consumers, we can change our lifestyles. We can also encourage our lawmakers to enact policies that will help lower the price of gas in the long run. (Loosening labor restrictions has both good and bad effects for a country and its workers. Check out The Economics Of Labor Mobility.)

Related Articles
  1. Retirement

    Ipsy Review: Is It Worth It?

    Discover the history of ipsy, how much packages cost, options available for membership, major competition and what the future looks like for the company.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    The Top 5 Micro Cap Alternative Energy Stocks for 2016 (AMSC, SLTD)

    Follow a cautious approach when purchasing micro-cap stocks in the alternative energy sector. Learn about five alternative energy micro-caps worth considering.
  4. Stock Analysis

    The Biggest Risks of Investing in Johnson & Johnson Stock (JNJ)

    Learn the largest risks to investing in Johnson & Johnson through fundamental analysis and other potential risks. Also discover how JNJ compares to its peers.
  5. Budgeting

    Craft Coffee Review: Is It Worth It?

    Learn more about one of the first and most flexible specialty-grade coffee subscription services on the market, a perfect fit for any coffee lover.
  6. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  7. Investing News

    The Next Stop for Oil: $18 a Barrel or $52?

    Predictions on the price of oil are all over the spectrum. Will it hit $18 or $52 this year (or both)?
  8. Investing

    Barbie's Body Wasn't the Problem (opinion)

    Barbie's body type wasn't what killed sales, argues Angela Travillian. Other factors were at play.
  9. Stock Analysis

    Financing iPhones: The Next Apple Move (AAPL)

    Look at how Apple's plan to finance the purchase of new unlocked iPhones will impact choices of carriers as well as profits for both Apple and the carriers.
  10. Stock Analysis

    From Shampoo to Soup, Unilever Has it Covered (UL)

    Open your fridge, your pantry, your bathroom cabinet and you'll find the Unilever logo. Here's how the company got so enormous.
RELATED FAQS
  1. How does a cost-of-living adjustment (COLA) affect my salary?

    Some companies build salary adjustments into their compensation structures to offset the effects of inflation on their employees. ... Read Full Answer >>
  2. Where can you buy NetSpend reload packs?

    You can only purchase NetSpend reload packs at Giant Eagle, Albertsons, Roundy's and Pathmark supermarkets. NetSpend cards ... Read Full Answer >>
  3. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What is the difference between an OEM (original equipment manufacturer) and a VAR ...

    An original equipment manufacturer (OEM) is a company that manufactures a basic product or a component product, such as a ... Read Full Answer >>
  6. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center