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?)
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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.)