Why does gasoline cost so much?

I`m sure that when people regularly walk by a gas station they wonder why does the price of gasoline changes so often and many people keep asking themselves why does the price of gasoline have been going up, but it never goes back down significantly. The often variations of gasoline prices is due to the constant change of demand and supply and the gasoline price usually doesn't drop because the supply can`t match the demand.

The price of gasoline is directly affected by the laws of demand and supply which state that as price goes up demand goes down and as price goes up supply goes up. There are multiple factors affecting the demand and supply of crude oil which is directly affects its derivative, gasoline. Government regulations and taxes usually have high taxes for oil of which is usually a 15% of the display price on the gasoline stations. Other factors as natural disasters also have a great effect on the pricing of oil. For example, The hurricane Katrina, destroyed numerous oil drillers in the Gulf of Mexico and that caused a increased on the price of gasoline because the supply had gone down and the demand hadn`t change, so prices had to go up to reach a new equilibrium.

The law of demand explains that as prices goes up, demand goes down, but gasoline does not necessarily follows this rule as we have been experiencing. I know, as the price of gasoline has been going up the demand has also gone up. This happens because the worldwide demand for oil has increased significantly. On 1984 a gallon of gasoline could be bought for $.25 but in 2005 the price of gasoline had raised to $2.86 in 2005, so in 21 years gasoline price rose for about $2.60. As other countries in developing had increase their demand for crude oil and this has affect greatly the price on gasoline worldwide. For example, in the last 10 years the amount of cars in Lima has triple and that has greatly increased the demand of oil. As Lima and as many other countries have gone through the same, demand has greatly increased, but the supply haven't be able to keep up to reach a equilibrium where the prices would be considered affordable by most of its consumers.

I would say that a high price in goods such as oil is good because that motivates individuals and firms to get into the market with a product able to substitute oil and people would be push to be motivated towards new technology that could be friendly environment, but if the price of oil was to be lowered, the demand would increase greatly and the supply would go down because of the lack of profit motivation from firm to supply oil and there wouldn't motivation either to create new products that would substitute oil successfully. 

Mining, an industry more about public relationships than minerals

Mining is an industry dedicated to the extraction of natural resources and here is where everything starts. Mining companies usually have to pay royalties to governments which are some kind of taxes that they pay based on their profit and the amount of minerals extracted from the ground. Mining companies usually face environmental regulation enforced by governments, this is done so the land won't be poisoned or polluted.  Mining companies usually spend a great deal of money and time in accomplishing all these regulations. Governments play a huge role in the amount of mining investors, because of the royalties; mining companies will decide whether to invest in a certain place or not based on the royalties that they will have to pay. Also, the ownership of the mineral which is determined by the governments plays a huge role in whether mining companies will invest or not. Also, mining companies tend to stay away from unstable governments because the government could take over the mining place and it would be a huge lost for the company. In other words, mining companies will only invest where the government is friendly a reasonable. Demonstrations are another factor that affects the mining companies because usually people living in the surrounding areas of the mining camps will demonstrate to get some good or service from the mining company. For example, a mining company comes to this place and they do their studies on the land and conclude that it is rich in mineral recourses, then they have to apply for permits from the government to extra the mineral, then they have to invest huge amount of money in environmental regulations, make happy the people in the surrounding areas by offering services like roads, water system, jobs, etc. And finally they have to pay royalties to the government. In other words, the mining companies have to give a ton benefits to people and entities that won't help them more profits. It looks unfair for mining companies but they help a lot of people and still make profit. In other words they work more in public relations than in extracting minerals because they usually focus on pleasing everybody that can harm their business directly or indirectly and after they have accomplished that goal they can start to extract those precious metals.