Why do people fail to connect population and gasoline prices?

When one considers gasoline prices are largely determined by supply and a demand, it is a logical connection to see a growing population as increasing the price.

Of course it is easier to blame the oil companies, but is that correct?

Demand is spurred not by a growing population, but by a growing economy. (eg Africa)

The top 4 largest consumers of oil are the US, China, Japan, and the EU... all rich, developed, industrialized economies. Oil = Wealth. Cars don't just need oil, so do rich economies.

Economists are the only people who believe in infinite growth. Unfortunately, supply of oil is Finite, while Demand is apparently Infinite. Global oil production has plateaued at around 85 million barrels per day (mbpd), while demand has been increasing at around 1-3% annually. Flat Supply + Growing Demand = Trending Higher prices.

Why is production flat? Well, that's the Big Secret that the oil companies, OPEC, and most governments don't want you to know about. We've already used up 1 trillion barrels of oil, and there's only 1 trillion left. We're at the top of the bell curve, the "peak" so to speak. It's all downhill from here, and uphill for prices.

The remaining oil is more costly & difficult to recover and extract, and it's also lower quality. Any new production that's coming online is not going to be enough to replace the old oil fields that are drying up. Of the 50+ largest oil producing countries in the world, 75% are past peak production. The 4 largest supergiant oil fields in the world, Ghawar (Saudi), Burgan (Kuwait), Cantarell (Mexico), and Da Ching (China), all 4 are in decline. And these 4 alone represent 10% of all global output.

However, your point about population is actually pretty correct when referring to world population over the last 200 years. The Industrial Revolution coincided with the greatest population growth in the world's history. Before 1800, it took all of human history for us to get to 1 billion. Then it took us only 130 years to double to 2 billion. Then only 30 years to 3 billion in 1960. Well, the Industrial Revolution could only have occured on such a large scale with coal & oil to fuel it - fossil fuels. Transportation to ship food, medicines, goods, people, etc. was all coal or oil-based.

Today, modern industrialized agriculture is heavily dependent on oil. All farm machinery & transport requires oil, as do the fertilizers & pesticides. Neither human nor animal labor is capable of agricultural production on the vast scale that we have now.

The temporary oil shocks of the 1970s will be parties compared to Peak Oil, which is a permanent Oil Shock. Look for worldwide recession, inflation, and unemployment - and perhaps worse. If Peak Oil is now (I think so), then Alternative Fuels do not have enough time to make up for the slack since they're not up to scale, making up only 1% of all fuel use today.

Google "Peak Oil" and the US GAO report on Peak oil.
oil prices down, refineries artifically taken off line=price gouging. Why are there idiots still trying to excuse the oil companies?
wow never thought of it that way but if you do consider it that way wouldn't everything be dremattically increasing just as gas? there is no other product that has increased that much in price over the past years.
Bush is solely responsible. Under Clinton, gas was less than a dollar a gallon. Under Bush? Well, it's obvious that he hates America, and only wishes to impoverish and destroy this nation and it's people, for his own profit- same with those that voted for him- criminal.
population does affect prices, but it is not the only factor.
Specifically, population does not change fast enough to explain recent fluctuation in prices.

Refinery maintenance is indeed the reason for current crisis.
More generally, wars in middle east and increased demand from China contribute to high oil price.
The world population grows at a fairly steady rate. There are no real fluctuations from year to year. This is unlike the price of gasoline, which fluctuates a lot from month to month. Since the population does not vary much from year to year, it is no real explanatory power for gasoline prices.

Other factors -- such as the weather or politics -- are much more volatile and are better explanations for changes in gas prices.
You are close - demand for oil (and in particular gasoline) has never been higher.

Some refineries go offline every year to change over blends - as required by the states, a silly idea actually. If gas prices are not high, nobody notices. If gas prices are high, everybody sees collusion and price gouging.

Oil prices are volatile because the supply is inelastic on the short term - the wells can only prioduce so much per day, the pipelines and transports can only move so many barrels per day. So a small change in the demand for crude - say 0.5% - will raise the price of oil by typically 5%.

It takes at least a year to build an oil well and get it on line - more like 3 yrs if it's in a deep offshore area. So if the price of oil suddenly goes to $75/bbl and I decide to build a well, a year from now I'll be able to seell you some oil.

Golly, it would really suck if the price of oil dropped back to $50 during that time - all my millions invested in my oil well might be wasted.
That would be fine...as long as the oil companies' profits remained stable. The spike in their profits is what makes this whole thing fishy. If there was a decreasing supply relative to stable/increasing demand, or if demand were increasing relative to a stable supply, or if there were increased costs for the oil companies to bring that supply to market, then I could understand why they would have to increase prices, in order to maintain their profits. Note I said maintain. If they increase their profits, then they are taking advantage of the situation in the same way a city's hotels increase room rates during a major event.

That's all right, seeing how businesses are all about making more money. But when the government essentially gives billions of dollars to the oil companies in incentives and doesn't ask for anything in return...then you have to cry foul. The US government has always had the oil companies' collective back, for the past several decades. It is entitled to demand that it get something back. But it is not doing it. The US government is to blame for skyrocketing gas prices; it is not protecting us.

The answers post by the user, for information only, FunQA.com does not guarantee the right.

More Questions and Answers:
  • Why the distribution of income in economy is not equal ?
  • What is economics?
  • What happens to demand and supply during each stage of the economic cycle?
  • Should the us share some of our wealth with the poorer nations? in central america?
  • Natural resources and illegals?
  • What would your guess be about the average donation to win $10?
  • Explain the limitations of national income statistics when used to compare living standards between countries?
  • What is Italy's imports and exports?
  • What is the use of demand theory from a managers point of view?
  • What is the best option for the United States interms of energy production in the future?