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CNN Breaks Down the Cause of $4 a Gallon Gasoline

By Duane Lester • May 20th, 2008

Surprise, it isn’t Bush:

One of the most common reasons cited for the price jump is supply and demand - we are using more oil, which accounts for 70% of the price of gas, and finding less of it.

Why we are finding less oil and using more of it is partly a result of the low prices during the 1990s. Those low prices - partly caused by low gas taxes in the U.S. compared to other developed nations - both encouraged rapid consumption domestically (think SUVs) and underinvestment in new production by the world’s oil companies.

By the time 2004 rolled around - and developing economies around the globe roared to life - the world was left in a pinch.

“Our demand has skyrocketed, but our ability to supply that demand has stagnated,” said Stephen Schork, publisher of the industry newsletter The Schork Report. Gasoline prices topped $2 a gallon for the first time ever in May of 2004, “and we’ve been off to the races since then,” said Schork.

Why don’t we have more of a supply? I covered that here.

Duane Lester is an ex-Navy journalist turned blogger and podcaster. He is the lead writer and editor for All American Blogger. You can also find him on StumbleUpon, Facebook, Twitter, LinkedIn, Blog Talk Radio and Newsvine. You can contact him by clicking the "E-mail this Author" button below.
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