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Gas Pricing

Gas is a non-renewable resource which occurs naturally from decomposition of ancient fossils enclosed under the ground. Natural gas has extensive uses ranging from residential to commercial applications. However, despite be a necessity in human life, gas prices has grown to a level that most of low level living families are straining to access this important product. This has raised severe debate on the gas pricing mechanism used to dictate the price of gas. In fact, most poor families are forced to change their budget on some basic needs such as food to generate funds in order to be able to access this necessary product.

Factors That Influence Gas Pricing

Especially in united states which Is the largest consumer of gas, the government and the major streams of media would argue that the high prices on gas is due to insufficient planning, less government regulations and greed. Although those factors have got an influence in gas pricing, they play a very minimal role in the inflated gas prices. Just like in any other products, the price of the gas is greatly influenced by supply and demand of the product. According to economic laws, price is inversely proportional to supply while demand is directly proportion to the price of a product.

With reference to the economic laws, the demand of gas is very high while the supply is relative low. This is the key factor contributing to gas pricing around the globe. Having in mind that, gas is non-renewable product which is only produced in few nation, the supply is relative low compared to the demand in the world market. Nevertheless, gas has alternative potential competitor a fact that gives gas suppliers to dictate the price of this product. With the look of things in the current market demand for gas, the chances of gas prices falling are very low.

The Role of OPEC in Gas Pricing

The Organization of the Petroleum Exporting Countries, OPEC is another contributing factor to the high gas prices. This organization enjoys monopoly which gives them power over the strong arm nations such as Canada and United States. This allows them to set whatever price of the gas they want as per the barrel they make use of. In fact, three quarters of the world gas is regulated by OPEC. Therefore, when the prices fail to move as per their anticipation, they manipulate the market by developing imaginary gas shortage. OPEC cuts back the production of gas until foreign storage run out the product and the prices goes up.