Why Do Gas Prices Keep Rising?

How does the price of oil affects the price at the pump?

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First of all, the most commonly known reasons for high gas prices are supply and demand, disaster, war. But, what is happening now is a result of the price of OIL FUTURES which are traded on the commodities futures exchange. The prices change daily depending on what the investors decide or think the price of oil will be in the future.

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So, what is Oil Futures you ask? It is really pretty simple. This is an agreement to purchase or sell oil at a set price on a specific date (in the future). The traders/investors (or speculators as they really are) look at the reported projection of supply and demand to come to a price and then bid on the price of the oil futures based on what they think the oil will be trading at.

In the long haul, when the speculators think the prices will be high, they then choose to bid high, thus a self-fulfilled prophecy, high oil prices without an oil shortage! This then creates a windfall, waterfall effect and other investors follow suit.

Crude oil accounts for about 55% of the price of gasoline. The remaining costs are split between taxes and distribution. So, when the traders bid high and sell high, we pay for it at the pump. There are some ways to save on you gas and fuel costs. Don't think that your hands are tied. You do have some options on saving at the pump and getting the most out of the gas you purchase. Investigate these options as there seems to be no light at the end of the tunnel on gas prices.

Why Do Gas Prices Keep Rising?

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