Causes of increasing gas prices - Essay Example

What is causing this rise in prices of gas? Is it merely supply and demand issues, or are there other factors that are influencing the rise in gas prices? This paper has the general aim of being informative of the causes of the rise in gas prices. However, within this general aim, the paper has a specific purpose in trying to uncover that the rise in gas prices is not merely caused by supply and demand issues. Gas prices in the USA are linked to international oil prices, as the cost of oil constitutes 70% of the cost of a gallon of gasoline.

Cost of oil has risen. Brent oil prices are a measure of the prices of prevailing in the oil markets. Brent oil has risen by approximately 52 cents over the last two months, reflecting a rise in price of gas by 47cents per gallon in the USA. Four factors are believed to be involved in the recent rise in gas prices. These four factors are rise in demand for oil, inability of oil production to match the rising demand for oil, political turbulence in the Middle-East, and speculation in oil (Hargreaves, 1).

The United Nations outlook for oil markets in 2010 demonstrates the reasons for an expected rise in demand for oil. The forecast indicated that there would be a rise in demand for oil to the tune of about 1.5%, raising demand for oil to 85.7 million barrels per day. Two factors would drive this rise in demand for oil. The main driver for rise in oil prices would be growing demand for oil from the emerging nations, like China and India, and the secondary driving force would be the slow emergence from recession of the developed world (United Nations, 63).

The rise in demand for oil in 2012 however, was not as large as expected. The International Energy Association has estimated that the demand for oil in 2012 will be 200,000 barrels per day less than the earlier forecasted estimate of 90 million barrels per day. The reason for this