High gasoline prices had enormous impact for the budgets of ordinary consumers, business expenditures and only brought oil producing Companies additional profits. In the beginning of January 2006, the pump price in the U.S. was $2.24 per gallon. The price increased by 9 cents compared with the same period of the past month. What are the factors for such high prices on gasoline? Crude oil as a major source in the production of the gasoline and amounts to almost forty per cent of the gasoline price .1 Thus, even small changes in the prices for the crude will influence the level of the gasoline prices. This could be clearly seen from the figure # 1 of the supplements. The level of gasoline prices saw the first significant increase as early as in the first quarter of 2004 even nowadays this tendency remains unchanged.

As the year of 2006 witnesses economic growth in different countries consuming oil, the demand for crude oil increased substantially. The rates of the gross domestic product (GDP) went up significantly in these countries. And as a result the United States and many other countries need more energy to satisfy the demands of their economic growth. For example, Chinese demand for oil rose by more than 16 % in 2005. The growing world oil demand also drove the prices for crude oil up and the market balance remained tight between demand for oil and oil supply. Tendencies in the world demand for oil could be seen in the figure # 2 of the supplements. World oil demand will be increased by 1.6 million bbl/d this year thanks to the U.S. growth after net decline of the last year. 2 Notwithstanding the fact that the demand for oil grows all over the world, the oil suppliers (both non-OPEC and OPEC supplies) will increase the amount of supplies in 2006 and 2007. The figure # 3 in the supplements presents the key facts. This step could ease the tension on the markets and eventually make the prices for the gasoline lower.

However, not only high crude prices influence the level of the prices for gasoline. Among the other factors are: extra costs for the production of various types of gasoline along with the environmental requirement in various regions of the country, lack of the investments into refineries and extremely low inventories reflecting tightening of the supplies in the market. Tight markets of oil drive the prices of the gasoline to the record heights. If the oil markets aren’t tight than refineries produce more gasoline and drive the prices for the gasoline down.







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