Gas is one of the important commodities in the world because this is used in operating large equipment and vehicles. Unfortunately, gas companies have limited control over the prices of the commodity in the world market because there are various factors that affect the costs of the product. In present days, most consumers complain about the high prices of this commodity. To know why are gas prices so high, it is best to look at the different factors that have great impacts on the costs of this product.
Improving Oil Demand
Why are gas prices so high? One of the important factors that affect the costs of the commodity is the improving demand of consumers for oil. According to some economists, the developing economies of India and China have great effects on the increasing demand for oil. Aside from these countries, the demands for oil in European countries and America are also high. The economies of the countries in the Middle East are also improving, which means that the nations also need a great supply of oil. Since the abundant supply of oil comes from the Middle East, the governments in this area prioritize their demands over the demands in the other parts of the world.
Supply Problems and Geopolitics
Two other factors that affect the prices of gas are the supply problems and geopolitics. International and local conflicts affected the supply this product in the different countries in the world. Some of the events that have limited gas supply are the war in Iraq and rise of rebel activities in Nigeria. The conflicts concerning the alleged development and use of nuclear weapons in Iran as well as the nationalization of oil companies in Venezuela also affected the supply of the commodity.
Geopolitics also affects the economic trends in gas. Companies have experienced problems with the production of oil in the past years because most of the sources of the commodity in America have gone dry. Because of this, companies resort to other areas like the Gulf of Mexico for abundant supply. Offshore production is very costly and expensive. Consumer should know that the higher the expenses of the companies, the higher the prices of gas in the world market.
Lastly, consumers can also attribute the increase in the prices to the exploitation of the natural limits of oil. According to some companies, most of the oil resources in the world have been used up. The companies also argue that there are only limited supplies of oil in the ground so they need to develop methods to find new sources for the commodity.