I wanted some additional information on what I have already ... is there more reasoning to why the prices are rising? Could the hurricane Katrina have resulted in this?
How can the economic reasoning be explained more. .. I have the added information that was provided but I need additional economic reasoning.
Gas prices are continuously fluctuating because the cost of crude oil on the world market is also constantly fluctuating. There are no new refineries have been built in the United States in more than 25 years due to some of the oppositions that ended the exploration of new domestic sources of crude. This is especially because big oil companies like Exxon, Shell, BP benefit from tight supply and heavy demand that sent crude oil prices higher on world markets. For example oil companies charge consumers based on commodity prices set on international markets. The higher prices are the reason the United States did not have major shortages of oil products after the hurricanes; the prices dampened demand and attracted more gasoline imports from overseas. So U.S forced to rely upon imported oil for a significant percentage of its supply, especially the oil from OPEC countries. OPEC uses spare production capacity to increase supply when the demand rises, and it leaves capacity idle when demand falls. OPEC has generally been constrained from lowering prices by the desire to maximize oil revenues, and by the internal political challenge of allocating cuts in production quotas among its member states. In this way it can effectively guide world prices. Another important reason that oil prices are so volatile is that consumers do not have any substitutes when the price of gas fluctuates.
When the prices fluctuate, many different segments of the economy are affected. For example automotive industry is affected because auto manufacturers design their models and engines according to the demand in the country. If gas prices increase most of the potential customers quit the idea of buying big SUV’s and trucks with big engines and they will shift to economic and hybrid models. Transportation industry (ground, air, sea) would be affected. For example people in big cities would quit using cabs and prefer subway. The energy industry would be affected and the price of electricity would increase because there many thermoelectric plants in the country and they are operated by gas. Petrochemical industry would also be affected because almost all of the products produced in this industry (e.g. aromatics, PVC, plastic, paraffin) are made of petroleum. Of course this would affect all the industries that use these products like a chain reaction.
Sources:
1. One Expert's Opinion: Henry Lee on Fluctuating Oil Prices
https://www.ksg.harvard.edu/news/experts/2000/lee_oil_prices_qa.htm
2. Exxon Mobil Profit Soars 75%
https://www.washingtonpost.com/wp-dyn/content/article/2005/10/27/AR2005102700449.html
3. Oil and Gas Price Stability
https://www.rppi.org/gaspricestability.html
4. High Gas Prices? Blame OPEC, Not EPA
https://www.ppionline.org/ppi_ci.cfm?knlgAreaID=116&subsecid=155&contentid=253566
5. The Bloating Of Gas Prices
https://www.newsnet5.com/news/487633/detail.html