Those of us who have cars are well aware of the fact that gas prices historically tend to rise during the summer months. This is due to a variety of factors, including increased demand due to summertime travel. This summer, is not different. In fact, gas prices may be ready to skyrocket in the very near future. Prices have already risen by 4 cents per gallon nationally in the last week, and experts now predict that prices could continue to rise by 15 cents or more in the next two weeks.
The cause behind the rise in gas prices is unsurprisingly oil speculation; investors believe the value of oil is higher this week than they did last week because they anticipate that prices are going to rise. In other words, oil speculation is a self-fulfilling prophecy, one that seems to hurt lower and middle class Americans year after year.
The force behind the rise in prices this time around is a combination of factors that extend beyond the typical summertime rises due to demand. The first is the brewing conflict in Egypt. If Egypt breaks into a civil war, expect prices to explode as doing business in the Middle East becomes more dangerous, and thus more costly. But don’t think that the avoidance of a full-blown civil war is enough to keep prices down; the mere possibility of war has convinced speculators that prices should be higher, a reality we are already feeling at the pump.
Two other lesser known but equally costly factors are also coming into play. The first is that domestic oil inventories are shrinking, causing the U.S. to rely more heavily in the immediate future on purchasing oil overseas at higher prices.
The second is one of the most important, and widely ignored, reasons for high gas prices: taxes. Every state in the nation charges you a tax to buy gasoline that is included in the price at the pump, and in most states, that charge results in a 10%-20% increase in the cost of gas. In my current home state of Illinois, for instance, 62.8 cents of every gallon of gas I buy goes directly to the state coffers, not including the various local city and county taxes that also exist here in Chicago. The result of this incredible hike in prices is that in the state of Illinois in 2009 (the most recent data I could find), the government brought in more than $1.6 billion in tax revenue from gasoline alone, which makes my state’s incredible budget deficit problem truly remarkable (and horrifying).
Despite the sluggish economy and already high taxes in many parts of the nation, eight states are passing laws to increase gas taxes by as much as 10 cents per gallon. So if you are a driver in Wyoming, Connecticut, California, Maryland, Kentucky, Nebraska, Georgia, or North Carolina, expect the pain at the pump to get even worse over the next six months in addition to increases caused by threats to stability in the Middle East and low U.S. oil reserves.
So the next time you stop in at your local gas station and watch in horror as your SUV guzzles up 20 gallons of gas at $3.50 cents per gallon, be sure to think of your state and local government representatives, who happily rob your wallet to pay for a bloated government that always seems to come back to taxpayers with its hat in its hand looking for more.
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