The Gas Geyser: Price Of Oil Skyrockets

Unfortunately, while gas prices have gone through the roof, people's paychecks have not. Which has probably left you wondering how high gas prices will go and whether or not you'll be able to keep your head above water.

Gas prices are affected by several factors. At the local gas station, gas prices are set by the cost of replacement. Basically, gas is priced according to how much it will cost to replace it rather than how much it originally cost to buy it. This means you have to pay for the fear of rising prices.

The rising price of crude oil is another factor that has caused gas prices to increase. This is attributed to the actions of some investors who have started bidding the price of a barrel of oil ever higher, resulting in record high gas prices.

These two factors work together as speculators begin buying more in anticipation of higher profits, which in turn causes prices to rise, resulting in a vicious cycle of ever rising prices for consumers.

All of this is compounded by the ever-weakening US dollar. When our currency gets weak against that of other countries, the foreign oil companies begin to charge more for gas. This, again, is another example of a vicious circle pushing prices up, since rising gas prices negatively affect the economy, which drives the dollar down and, well, you get the idea.

So how high are gas prices going to go? Investment firm Goldman Sachs, one of the world leaders in finance, anticipates that crude oil will rise 25 dollars per barrel. In general, a dollar increase in a barrel or oil results in a rise in gas prices at about 2 cents per gallon. So $6.00 per gallon may be coming!

If Goldman Sachs is correct, you're looking at another 50 to 60 cent increase in the price of a gallon of gas. For most of us that means gas prices of $6.00 or more. On a more positive note, gas prices are expected to drop again in the fall, but don't bet on a return to $2 per gallon any time soon. Keep tightening those belts and do everything you can to get better fuel economy.

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