Why Do Gas Prices Fluctuate?

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Why Do Gas Prices Fluctuate? In the United States, most drivers are well aware of the persistent erratic gas price changes over the past few years. One day the prices might be at a lowered price, and the next day the prices could possibly be raised to an even higher price than it was before. This might lead to individuals being confused as to why these sudden price changes are occurring. Some people who may not understand what is going on might feel as if they are being cheated or ripped off. It even makes it difficult for one to budget their gas expenses. There are a few different factors that have contributed to the rising and falling of the gas prices. The perpetual fluctuation of gas prices has a lot to do with the oil supply and demand, the costs of the refined crude oil which is used to make gasoline, distribution network disruptions, the value of the U.S. dollar, and the oil trading market. Supply & Demand: Crude Oil and Gasoline According to David Ramberg and John Parsons (2012), “Several recent studies establish that crude oil and natural gas prices are cointegrated [sic]” (para. 1). Because the price of crude oil tends to change quite often, it causes the cost of gasoline to vary as well. Supply and demand is one of the main reasons why gas prices are driven up and down. More than likely, the price of crude oil will decline when the level of supply is at a high. On the other hand, when the supply is limited, the price of the oil will rise once again. While the supply of crude oil has been somewhat steady over the years, economies are steadily growing. As a result, the demand for crude oil is on the rise. As explained by Jad Mouawad and Julie Werdigier (2007): Bolstered by speedy economic development and industrialization, energy demand from Asia has been one of the main contributors to higher oil prices. Over the last two years, China and

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