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.
