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A small business blog featuring tips to help entrepreneurs succeed in the small business world. Topics include family business, human resources, marketing, money, networking, operations, ownership, startup, taxes and technology.
What Makes Gasoline So Expensive These Days?
On the surface this may not seem like a topic related to small business, but it most certainly is. The price of gas affects all of us in tremendous ways. And if you travel for the sake of your business, it’s really hitting the wallet hard.
Last summer, when gas prices averaged $3.00 a gallon, most of us assumed that would be the worst of it. Boy, were we wrong. With gas prices currently averaging $3.20 a gallon (though it’s closer to $4 on the west coast), the anticipation of what this year’s summer will bring is a black cloud looming over our heads.
So, what’s the deal? Why can’t we keep something affordable that nearly every person in the nation is so dependent on? That right there is the problem… our dependency on gasoline for our every day lives. Now, I’m not trying to go “green” here, but the concept of supply and demand is not new to the business world. As the demand for a product increases, and the supply decreases, then the price continues to climb.
Granted, like many people, I do have a huge problem with the fact that the price of gasoline doesn’t have to be as high as it is. For example, last summer crude oil traded at a record high of $79 a barrel and gas prices reached an average of $3.03 a gallon. Currently, crude oil is going for about $65 a barrel, but our gas prices have already surpassed that of last year, and the summer hasn’t even begun.
It’s all about the “benjamins.” At least, that has a whole lot to do with it. As long as it means more money in their pockets, the gas giants take advantage of our dependency and keep the price of gas rising. Why? Because, no matter how much we complain, we’ll keep paying whatever is on the pump. And with summer travel spikes on the horizon, we can expect to see the price continue to climb until the fall.
You might think that those in the position to change things would look out for the well-being of their fellow Americans and give us a break. But they won’t. Greed can be a strong motivator.
There are other factors, of course, that keep the price of gas on the rise. Like the outages our nation’s refineries have been having lately, which decreases production, thus decreasing supply. And, according to the Energy Information Administration (EIA), gasoline stockpiles have been drained more quickly over the last three months than any time in the history of the EIA’s record keeping. That, my friend, is not a good thing.
If the situation gets any worse, gas prices can actually cause people to lose jobs because they can’t afford to drive to work, go deeper in debt, etc. And small businesses aren’t safe from the affect of pump prices either. Any business that provides any sort of service, such as delivery, lawn care, etc., will likely, at minimum, have to increase the cost to their clients to make ends meets, which can sometimes result in the lose of customers.
In order to beat this epidemic, we are going to have to step up and fend for ourselves. First and most importantly, budget your finances, both personally and for your business. Estimate as to how much you travel on a monthly basis, factoring in average mileage, how many miles to the gallon you vehicle maintains, and how much it costs to fill up your tank. Also factor in possible increases in gas prices, as it will likely happen.
Once you determine how much you need to spend a month on gas to get around and keep things running smoothly, compare that to the rest of you expenses. Learn to cut corners were you can afford to, without compromising the product/service you provide, and do it if necessary. You may also want to consider “going green” in whatever ways you can in order to help deter our national dependency on oil.
Adaptation is the key. Hopefully that means finding a way to sever our ties to oil in the near future. They say they’re working on it. Here’s hoping.
• CNNMoney.com: Why gasoline prices are rising while oil isn’t
Related Small Business Buzz Posts:
The Cheapest Gas Prices in the Nation
Finding the Right Price for Your Product or Service
A Little Relief from High Gas Prices on the Horizon
The Right Way to Write-Off Business Expenses (Part 1)
But on the Other Hand . . . (i.e. Exploring Options)