The Truth Behind Increased Oil Prices | Oil Prices

The Truth Behind Increased Oil Prices

Oil has had a very important place in the world throughout the years. Today it is
used for running automobiles, equipment, manufacturing plants around the world.
In addition, derivatives are used in beauty and health products, as well as gasoline,
which has resulted in high Oil Prices. This oil comes from fossil fuels buried deep
in the earth and formed from layers of compressed plants and other materials that
were on the earth millions of years ago.

Ancient records have been found that show oil was in use in the time of Herodotus.
However, it was not used as it is in modern society today. In those times, it was
used as a medicine or liniment and there is even reference to it being used in some
manner in building construction.

In Western Pennsylvania it was also used as medicine by the Seneca Indians and flowed
from natural springs in that area. It was in 1859 that the first oil well was drilled
and produced approximately 15 barrels per day. This is when today's Oil Companies began.

Texas and Oklahoma are the center of oil production in the United Sates and it was not
until after World War II that the Middle East also became a major source of this fuel.
Prior to the automobile, it was used mainly for lighting lamps and in furnaces. At the
present time it is used in most types of equipment that moves, particularly vehicles.
It has also been used to produce electricity, run machinery and other things that require
energy to work.

The oil, produced by these fossil fuels, is a mixture of various compounds, found in the
location and is often called 'rock oil, from the Latin. Oil can come in many different
forms and colors and has other properties as well, which must be converted into what is
commonly seen on the market today. Each location has its own unique qualities.

Prior to being processed, the common name used is crude oil. At this stage, it may be
black, green or other colors as well as being thick or thin. When the crude oil goes
through a refinery, it is separated into groups to be used for various purposes.

Today everything possible is being done to wean the world from its dependence on this
oil, including renewable energy. Reasons for this change of thinking are many. First,
and foremost, it has been found that the fumes from the refineries send harmful emissions
into the atmosphere. Warnings of global warming has made people very aware of this fact.

There is also the knowledge that fossil fuel does not replenish itself and will, eventually,
no longer be available. Therefore, scientists throughout the world are working to determine
a replacement and eliminate the dependence on this product. In the past few years a great
deal of attention has been directed to solar energy and biofuel.

Solar Energy, of course, comes from the sun's rays and has been very effective for heating
purposes as well as electricity. It has replaced oil in many instances and solar plants have
been built all over the world. Biofuel is made from plants, such as corn, manure and other
natural products to produce methane and ethanol gases, which can be used to produce electricity
and other energy connected products. Unfortunately, at the present time using biofuel has not
reached a stage where it can be produced at a reasonable price.

The price of oil depends on many factors. For many years, the United States had a price control
on oil and it could not be raised above a certain dollar amount per barrel. After this control
was abandoned prices have gone up and down with the highest, in the US, being $145 per barrel
in July of 2008. By December the price fell to $30.28 per barrel. This is a long way from the
$2.50 and $3.00 per barrel from 1948 through the 1960's.

The price of oil per barrel is largely controlled by OPEC (Organization of the Petroleum
Exporting Countries). Formed in 1960, it consists of Qatar, Indonesia, Libya, United Arab
Emirates (seven Arab countries), Algeria and Nigeria. Originally, this group was formed to keep
oil prices steady but eventually has become a cartel that set prices as the world, including
the United States, became more dependent on their production of oil.

Because the control of oil production by OPEC has such a stranglehold on the world they have
used their power to continually raise prices. In 1973 gasoline, nationally, was approximately
38.5 cents per gallon, by June 1974 it was 55.1. Many old timers can remember when service
stations had price wars with gasoline selling for as little as 10 cents a gallon with dishes
as a bonus.

Also, in the 1970's there were government price controls which caused a shortage of gasoline.
The plan was to encourage oil exploration in new areas. Any alternative energy exploration was
discouraged and even forbidden. The result of this tinkering with the market led to a shortage
of gasoline and even led to many unusual types of rationing such as odd numbered license plates
getting gas one day and even numbered license plates the next. Many service stations often found
themselves with no gas at all.

In addition to the high prices of barrels of oil, it must not be forgotten that this oil must be
refined to be made into gasoline. This means the use of huge refineries, that have the usual
business expenses of workers, machinery and other things. In addition, there is transporting the
fuel to the gasoline stations.

One must also not forget how the federal government and the states have added special taxes to
each gallon of gasoline for road repair and other purposes. California has the highest gasoline
taxes with 63.9 cents for gasoline and 72.0 cents per gallon for diesel. This is for federal
and state taxes. There is also a 6% sales tax, a 1.25% county tax, a local sales tax and a 1.2
cpg state UST fee. In addition, the service station owner must make a profit as well. It seems
as if the world remembers to assign meaningful renewable energy investments only when oil prices
go up however, this has taken place so much these past few years that it has resulted in very
serious exploration for renewable energy.