The most basic explanation for the change in the price of any good or service is the difference in the demand and supply. When the demand is greater than what is being supplied, the price of the commodity will start rising automatically until equilibrium in the economy is reached. Having said this, if we analyze the condition of the United States, we see a gradual increase in the price of gas over the past couple of years which has greatly disturbed the spending patterns of an average American. Not only have are we forced to keep a larger sum of money from our monthly budget for expenditure on gas but we have also started using our cars much lesser than before. A private survey held recently showed that the total number of cars on the road have decreased by two to three percent since 2008 – when the increasing trend in the price began.

But the pattern of rise in oil prices domestically show that the supply and demand has remained comparatively constant over the years; then why is there so much fluctuation in the prices of gas? There are a number of internal and external factors which have played an important role in the change of gas prices in the recent years; analyzing the condition within the country, we see that the present government has shut down most of the oil exploration programs in the past couple of years. This has resulted in a speculation of increased oil prices in the future. In addition to this, the recent floods in the Mississippi River caused a concern among the oil distributors about shutting down of oil refineries in the flood struck areas – this also affected the prices in the country. Along with that, the new taxes and import duties on oil and other related petroleum products have a significant impact in determining the prices of gas in the country.

In the international scenario, the supply of oil has decreased considerably after the turmoil in Egypt and Libya; US is currently the biggest importer of oil in the world, so the change in supply of oil internationally has a direct effect on the domestic gas prices since more than 55% of gas prices are determined by the changes in prices of crude oil. Before Libya and Egypt, US also faced difficulties in meeting its demand and supply for petroleum products when the war in Iraq started, but now its affects have weakened to a certain extent.

The sudden increase in the prices have directly and indirectly affected the lives of average US citizens by bringing in a way of inflation – the rise in gas prices cause an increase in transportation fares and freight delivery, this as a result causes an increase in prices of food and other related items. Thus the government needs to take effective measures to control the prices of gas and to protect the economy from external shocks so that the standard of living for an American can be maintained even during a recession.