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Gas Prices Drive Skyward

This week American drivers had their eyes on the gas pump as gas prices rose for a 24th consecutive day. On Friday, March 2, 2012, the average American price per gallon rose to $3.74, up 46.5 cents per gallon since the year began. This trend is especially troubling considering we are months away from summer, when prices traditionally spike in response to increased demand as families hit the road for vacations. This year, Americans wonder whether gas will roll over the $5 a gallon mark. It is a real possibility.

030512-1 American drivers are not the only ones monitoring the pump. Headlines in newspapers across the country have been following the story of rising gas prices. Politicians on the campaign trail worked the issue into their speeches, Washington leaders monitored the Middle East, and economists and consumers speculated about the ripple effect rising gas prices will have on other prices.

From where does gas come? What factors influence the price? How are gas prices set? Where are prices highest? How do gas prices affect other industries? This week you will ride the internet to sites that will answer these questions.

The Trip to the Pump

030512-2 Perhaps the first step in understanding the price of gas is to understand the process of creating gasoline. Gas does not emerge from the ground ready to pump into a car. It is extracted as crude oil. To learn more, listen to Oil’s Trip to the Pump. Hit the play button to watch the video and see the route crude oil takes to become gasoline. Then, open the tab, Gas Prices and Opec. How does Friday’s average gas price compare to the highest price in February for each of the past four years? Calculate the average April gasoline price since 2008. How does Friday’s price compare? Which countries produce the most crude oil? Which countries have the ability to produce more? Which OPEC countries do you recall reading about in [TargetNewspaper]? What do you know of the political climate in OPEC countries?

Gas prices are affected by many complex factors including supply and demand, political upheaval, and the geopolitical conditions in countries that supply crude oil. Uncertainty often results in higher prices. This year there is much to be uncertain about: new sanctions imposed against Iran’s crude oil in response to Iran’s nuclear weapons program, the continued uncertainty in the Middle East and growing turmoil in Syria, and health concerns about the Venezuelan President coupled with Venezuela’s upcoming presidential election. Return to the OPEC chart. Explain why these examples of uncertainty might increase gas prices.
The U.S. Energy Information Administration provides a wealth of information about fuel economy. Read more about Factors Affecting Gasoline Prices. Explain the four parts that contribute to the price of gasoline. For a more visual representation of these factors, travel to Pump Pains. Explain into which section of the chart you would list the population boom in and increased industrialization of China and India. Which factor contributes the most to the cost of gas? Which contribute the least? Why do New Orleans drivers pay less at the pump than those in Boston?

How much do gas prices fluctuate in the United States? Where are prices highest? Return to the U.S.E.I.A. site to view national and state gas averages. A chart representing national averages is on the left. A graphic of state averages is on the right. How does the cost of gas compare to a year ago? Has the price changed since yesterday? If so, by how much? How does the price of gas in your state compare to other states in the region? Which states boast the lowest gas prices? Which have the highest price? Click on the map to see a detailed list by state. How does gas in your state compare to today’s national average?
As consumers watch gas prices, analysts at the Energy Information Administration offer their price predictions. (Click on the third dot above the printer icon to view gas projections, or wait for the slideshow to advance.) Do EIA analyst predictions support fears of $5.00 a gallon prices? What price do they predict gas will peak at in 2012 and when do they anticipate it will hit that price?

Why is even the possibility of $5.00 a gallon shocking to most drivers? Most drivers in the United States are between 45 and 54 years old. They remember the days when gas cost much less than $5.00 a gallon. Use the data in this historical chart to calculate how much 10 gallons of gas cost when a 50 year old driver was 21 years old. Use the current average price in your state to calculate how much 10 gallons of gas cost today.

Gas Prices

030512-3 Why does the cost of gasoline matter so much? To answer that question, imagine what you would do with $30. Now imagine you are a typical driver: you pump 60 gallons a month of regular unleaded gasoline.  A 50-cent increase per gallon adds $30 a month to your gas expense. Did you plan to spend that $30 on gas? What do you have to wait to buy?
In addition to the effect on a household budget are the ripple effects felt across industries. What do gas prices effect? Everything! Return to the Associated Press’ interactive feature. This time, select the middle tab, Gas Price Effects on Industry. Click on each image to see why gas prices affect that industry.

Finally, dissect the infographic, How Rising Fuel Prices Effect Everything. Which raw material has increased the most in price? What consumer goods use that raw material? How much money is taken from the American economy when crude oil prices escalate $10? What might that money have been spent on? Provide examples that illustrate how that loss ripples across the economy.