Are higher gas prices the result of a weakening dollar or increased demand / less supply?
by 
MrBLT needs to be contained
ANSWERS: 5
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increased demand...and less supply in the usa. environmentalists have put the clampers on more oil wells. so we have to get on our knees to go to arabia for oils. i think it is mr. bush's plan to bow to arabia so the usa will see their mistake and allow more drilling at home. if the usa could drill more holes, we could have cheaper gas.
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They are the result of pure, unadulterated greed. And hello, mrblt. How are you?
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neither....research futures trading. 'nuf said.
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I've been looking into this a lot lately. As frustrating as it is, it ends up having to do more with speculation and futures trading than anything else. http://www.investopedia.com/ask/answers/06/commodityprices.asp While there's hundreds of sites you could read up on, here's two that go into perhaps the best overviews - http://www.bucyrustelegraphforum.com/apps/pbcs.dll/article?AID=/20080527/NEWS01/805270302 http://en.wikipedia.org/wiki/Oil_price_increases_since_2003
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The falling dollar, tension in the Middle East, increased demand world-wide, and the fear of dwindling supply, all has been causing commodities traders to bid up the price of crude oil. At the same token, increasing prices justify and finance more exploration, and makes oil that's more expensive to extract profitable when it wasn't profitable to get it at lower prices -- which will lead to an increase in supply, which will in time bring down the price again. The increased price of crude translates into increased costs for gasoline companies, though it does not shift the price up proportionally. Higher crude costs merely make for a steeper supply curve for gasoline, but the demand curve remains unchanged. As we are still operating in the elastic side of the demand curve, the new equilibrium price for gas is only slightly higher, while equilibrium quantity is considerably less. Which is why gas business profits are down (while crude oil profits are up). Gas taxes, however, increase proportionally with all increases in price, so for every 2x increase in the price, there's a 2x increase in the tax.
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