Why are gas prices so high?

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SALT LAKE CITY -- If you haven't noticed that gas prices for the past month have been going through the roof, you're either not paying attention, or you're mostly getting around on a bicycle.

Who is the most to blame for rising gas prices? Is it the President, the oil companies, demand from China or a combination of factors? Well, it's complicated.

So what exactly is driving up the price at the pump? Can we ever expect to pay less than $3 a gallon ever again?

Economist Scott Schaefer, a professor of finance at the University of Utah business school, said today's prices, and even higher prices, could be our new reality.

"I don't think we're going to go back to the days of $1, $2 gasoline anytime soon," Schaefer said. "I think relief at the pump might involve a bicycle."

He predicts that high prices will "change the way we live, and that people will use public transportation more and live closer to work.


The world economy is surging. Economic growth in China and India creates demand for oil. Schaefer said that increased demand for shipping and manufacturing goods requires more oil, and a driven by basic supply and demand economics. But, economic growth is not the only factor.

"Oil prices and gasoline prices in particular, are higher now than they have been this time of year, essentially at any time in our history." Schaefer said that has a lot to do with tension with Iran.

"People are concerned that maybe there will be a supply disruption which means that prices will be high in the future."

Does price gouging gouging or collusion among oil companies play a factor in the high cost situation?

"The best thing that consumers can do to keep gas stations honest, is just shop around," Schaefer said,

Competition reigns in price gouging, according to Schaefer, but, it only works if consumers shop around. He also does not accept the political suggestion that government intervention or an energy policy overhaul could significantly lower prices.

"I don't think there's any actions that a U.S. president could take that would have a really significant impact on gasoline prices."

Many have probably also noticed that Utah gas prices rarely rise and fall with the rest of the country. Schaefer chalks that up to geographic isolation.

"Prices in Utah tend to follow their own pattern of demand and supply of the salt lake market," he said. Fortunately, our prices tend to linger below the national averages. So, we all look for relief. Almost as though we have an illness, we look forward to the day when we'll be well again. Schaefer says that day may never return. Oddly, that might be a good thing as it relates to our overall economy.

"When the economy is really struggling, that's when gasoline prices tend to fall," he said. "I think we're probably all better off having jobs and having money in our 401ks and paying $4 and $5 gasoline than we are paying $3 gasoline and being unemployed."

How are Utahns coping?

People are always doing what they can to keep gas prices from wrecking the family budget. At the start of each workday, thousands and thousands of commuters crowd Utah's roadways. At 6:51 every morning, Chandler Whipple heads downtown.

"My car is older, so I don't really trust it to get all the way downtown," Whipple said. "But I trust it to get me to the TRAX station. It's too expensive with the cost of gas."

Whipple says those high prices are one reason why he rides the train frequently, and he is certainly not alone.

"I've been in Utah over ten years and the gas prices keep going up and the higher they go the more I get on the train," said Christie O'Sullivan, who also feels the pinch. "Anything over $3 is too high for travelling to work."

The Utah Transit Authority spokesperson Gerry Carpenter said that those rising prices will have an increasing effect on the ridership of Utah's public transportation options.

"With gas prices going up we expect to see, again, a rise in our ridership as people look for other options," Carpenter said.

Driver Kris Davis, was upset about the cost of gas jumping about .50 cents in just a couple of weeks. She said that it is likely to start having an effect on her driving habits.

"I was just thinking I give a lot of people rides, I really don't mind it's not a big deal," Davis said. "Lately I might have to start charging cause this is getting a little ridiculous."

Tooele County resident Colleen Brockbank said that rising gas prices could have a ripple effect.

"I worry about businesses starting to fail again because of the gas prices," Brockbank said.

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Jed Boal


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