What is the real reason for high gas prices?

Well basic economics will tell you that usually two factors will work together to determine what the price of a product will be. The first is supply. The amount of any specific product that you have readily available to sell. And the second is the demand for that product. With essential products such as gasoline, there is always a demand and it is usually fairly predictable. During the summer, prices traditionally rise because it is an American tradition to pack the family in the car and go somewhere. When millions of people across the country do this at roughly the same time, this causes a huge spike in demand, allowing the prices to rise.

In the early part of 2009 we saw more and more however that although prices continued to fall on raw crude oil, (thus the cost of the base raw material was cheaper) while at the same time demand was dropping sharply as well as people had become accustomed to conserving gas during the huge price increase the year before. Most refineries were working at only 70% of their capacity in order to keep to much processed gasoline from hitting the market. Even so, the national oil reserves were reporting gains across the board.

So with massive increase in supply, and a fairly large decrease in the demand for the products, the market dictates that the price of oil should have dropped. Instead they started increasing. When all of the facts are looked at closely, it would seem that those who refine and distribute gasoline in the United States of America, had decided to band together and all increase their prices despite a failing market for their product.

Normally, a free market would regulate such a trend. If the price of something is out of line, you just don't buy it. This done on a mass scale would cause a business to lower their prices, or fail. However with essential items, such as food, and energy, the market cannot properly respond. Although we would love to give these price gougers the finger, we cannot simply not buy gasoline, as there is not a valid alternative.

Many of the antitrust and monopoly regulations that are a part of American Corporate Law are put into place so just such an incident cannot occur. However, the evidence increasingly indicates that the oil industry companies are doing exactly that. What's worse, is that nobody in any recent administration has taken the necessary steps to prevent such an event from occurring.

It is an interesting connection that while we were having the largest crisis based around the price of fuel in recent history, a former oil company CEO sat in the oval office, and Big Oil companies released the highest profits of any company ever in global history.