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  Gas Prices: Gouging or Supply and Demand
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ContributorBob 
Last EditedBob  May 16, 2008 07:44pm
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CategoryOpinion
News DateMonday, May 6, 1996 01:00:00 AM UTC0:0
DescriptionSince January, angry Californians have watched the price of gasoline and diesel fuel climb to unprecedented levels. Not since the Exxon Valdez oil spill in March, 1989, and the Iraqi invasion of Kuwait in August, 1990, have we seen fuel prices rise so rapidly.
Between early January and late April, average statewide wholesale gasoline prices have increased 65 percent -- up from 62 cents per gallon to $1.03. Wholesale diesel prices spiraled up 44 percent -- rising from 68 cents to about 99 cents per gallon or higher in some locations.

Retail gasoline prices went up, on average, 33 percent during that same period -- from $1.15 a gallon to $1.53, and retail diesel prices are up 23 percent, climbing from $1.33 to $1.63 per gallon.

What is especially troubling is there has been no obvious precipitating event to account for climbing prices. Californians are demanding to know: who is to blame?

Unfortunately, there is no one single answer. Instead, a number of factors are working in combination to cause these price increases.

First, the world price of crude oil has increased dramatically--- approximately $5 per barrel by mid-April. For every $1 increase in the price of crude oil, consumers can expect to pay about a 2.5 cents more per gallon for whole gasoline or diesel fuel. This fact explains 12.5 cents of the per gallon fuel price increase.

Oil price increases represent a daily loss of over $5.2 million per day from the California economy. Since California purchases about half its oil from Alaska and foreign sources, that much money goes to purchase oil from out-of-state markets at a $5 per barrel higher price.

Second, rising world and U. S. oil prices are further complicated by the delay in ongoing negotiations between the United Nations and Iraq. Unfortunately, by conducting these negotiations openly, the U.N. has fueled market speculation in anticipation of the addition of up to 700,000 barrels of Iraqi oil into the world market.

Third, unusually
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