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Oil and Gas Prices

In: Social Issues

Submitted By tchow2010
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Oil and Gas 2

There are many issues that cause the cost of oil and gas to increase. The main contributing issue to the increasing cost of oil and gas is supply and demand, when demand is greater than supply, the price of oil and gas will increase. The factors that affect supply include increased demand, problems with refineries and pipelines, and disruption to supply or threat of disruption to supply.

With the increased demand for oil in the United States and other countries such as India and China; the extra demand for oil has put enormous pressure on available oil reserves. The Energy Information Administration stated, “If refinery or pipeline and/or reductions in imports cause supplies to decline unexpectedly, gasoline inventories (stocks) may drop rapidly. This may cause wholesalers to bid higher for available supply over concern that future supplies may not be adequate” (Energy Information Administration, 2008, para. 9). With this in mind, the other underlying factors that affect supply are disruption to supply or threat of disruption to supply along with The Organization of Petroleum Exporting Countries (OPEC).

The Organization of Petroleum Exporting Countries is an organization of oil producing countries which produces over 40% of the world’s crude oil and has two-thirds of the world’s oil reserves. This organization was formed in 1960 to regulate the supply of oil and to some extent, the price of oil. The organization includes Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, and Venezuela. Mouawad, J. stated, “The cartel has refused to pump more oil, fearing that any hasty move would lead to plummeting oil prices” (Mouawad, 2008 para. 19). With OPEC refusing to increase production and reserves being depleted, a conflict or threat of conflict can be an issue of concern.

If there is a conflict or…...

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