Gas Price Elasticity
The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800 service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12, 2000, increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents over the past month (Anonymous, 2000).
How far will it rise? What will consumers do about the dramatic increases that are occurring with the arrival of each shipment? Price elasticity of demand would indicate that demand will fall as prices continue to rise, which in turn should result in a reduction of prices and a subsequent increase in demand. Such may prove to be the case, but the scenario is an unlikely one.
Prices have increased all over the country, but price increases in the Midwest have been even more dramatic than in other areas. Across the region, prices are averaging $1.874 for a gallon of unleaded, but that same product is well over $2 a gallon in many of the cities of the Midwest. Higher grades average $2.003 across the region, marking the first time that average prices have been so high in a specific region of the country (Anonymous, 2000). There is so much concern over the rising prices that apparently are continuing to rise without abatement that the Federal Trade Commission (FTC) has "opened a formal investigation into soaring gasoline prices in some areas of the Midwest and will begin issuing subpoenas to oil companies by the end of the week" (Hebert, 2000; p. aol).
Sen. Richard Durbin, D-Ill. believes that the oil companies will reduce prices right away once the subpoenas begin to appear, and the country's vice president has mentioned that collusion may be behind the oil companies' huge profits this year (Hebert, 2000). The summer driving season always brings higher prices in response to heightened demand, but never to the extent seen this year.
Of course the final cost of gasoline at the pump is affected by the price of a barrel of crude, but to a lesser extent than oil producers would have consumers believe. The price of crude accounts for only 30 percent of the final cost to the consumer (Brodrick, 2000a). In 1981, the cost of crude accounted for 62 percent of the final c...
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...evert to normal levels following the world oil shortage in the 1970s, but of course that never happened. Because the government controls more than 37 percent of the final cost, only 63 percent of the cost is open to being affected by market forces. Gas is a low elasticity product for the reasons discussed above; the wonder is that it does not cost even more at the pump.
References
Anonymous (2000). Economics 52 - Using Price Elasticities to Forecast Prices. At http://nimbus.temple.edu/~glady/GasPrice.html.
Anonymous (2000, June 19). Record Gasoline Prices for Fourth Week in a Row. Reuters at www.aol.com.
Anonymous (2000). The Strategic Petroleum Reserve. US Department of Energy, Fossil Energy at http://www.fe.doe.gov/spr/spr.html.
Brodrick, Cynthia E. (2000, February 15). How do gas costs affect consumers? At http://aol.thewhiz.com/2000/02/000215d.asp.
Brodrick, Cynthia E. (2000a, February 15). The cost of a gallon of gas. At http://aol.thewhiz.com/2000/02/000215b.asp.
Georgy, Michael (2000, June 20). OPEC Prepares To Raise Oil Exports Again. Reuters at www.aol.com.
Hebert, H. Josef (2000, June 20). FTC Opens Gas Price Investigation. The Associated Press at www.aol.com.
One of these factors was the logistical nightmare of redeveloping the infrastructure needed to transport oil to the refinery. As early as 1881, Standard oil operated approximately 3,000 miles of pipelines, eventually owning ninety percent of the nation’s pipelines. Although transcontinental railroads were an available alternative, pipelines were cheaper, reduced handling and storage fees, and were more efficient. The fact that modern oil companies invest hundreds of millions of dollars into speculating for sustainable natural oil deposits implies that such deposits are rare and hard to identify with a passing glance. If the spurts of oil proved to be isolated incidents, the capital invested in building pipelines and reestablishing a monopoly would have been squandered.
Scherer, Ron. "US to Tap Strategic Petroleum Reserve to Drive Gas Prices down." The Christian Science Monitor. The Christian Science Monitor, 23 June 2011. Web. 09 Apr. 2012.
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Weeks, Jennifer. "BP's Financial Pain From Spill Is Just Beginning." CQ Researcher 21.29 (2011): 688. MAS Ultra - School Edition. Web. 17 Feb. 2014.
Pratt, Joseph A. “Exxon and the Control of Oil.” Journal of American History. 99.1 (2012): 145-154. Academic search elite. Web. 26. Jan. 2014.
Smith is against mercantilism, which puts more government emphasis on exports than imports and typically puts high tariffs on imports. The goal of a nation, according to Smith, is to be wealthy, and that means to have plenty of affordable goods and services. To Smith, the best political order would be centered on the market. The goal would be to have a larger market so the citizens would be able to specialize more and increase production. It appears that Smith’s views on the type of political order are along the lines of what we consider capitalism today, and that Smith does not agree with the government involvement in citizen’s life. In this type of political order, the citizens profit from their product, and they also help others by hiring workers and paying rent on the property they are using. The success of the individual is determined by his or her wealth, and wealth is the amount of stuff an individual can buy with his or her money. To be a successful nation, all of the individuals have to be wealthy, and therefore the nation will be
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West, Jim. ?Different Views of Gasoline Taxes.? The Oil and Gas Journal August 14, 1995: 9.
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The Australian Broadcasting Corporation’s (ABC) news article titled, “Petrol price soars, more pain at the pump ahead,” discusses the rise in the price of fuel and its effect on Australian motorists. This article also discusses how this rise in the price of fuel occurred, mainly focusing on its effect on consumers (Janda 2014).
In this paper I will use a multitude of research that shows scholarly evidence on why single sex education is harmful to one’s over all wellbeing and physiological health throughout one’s life. Single sex education is defined, as “the practice of conducting education where male and female students attend separate classes or in separate buildings or schools”(Pinzler, p. 785, 2005). The controversy over single sex education involves aspects such as its effectiveness and social ramifications of binary genders. Supports of single sex education believe that there are fewer distractions because everyone is of the same sex. Supporters also believe single sex education is also seen as a way to break down stereotypes such as women not doing well in the math and science field. They believe that single sex education helps males also break out of typical gender roles such as hyper masculinity. However, proponents believe separating girls and boys makes little to no difference in their academic achievement and is actually more harmful to your identity.
Mast, Tom R. Over a Barrel: A Simple Guide to the Oil Shortage. Austin: Hayden, 2005. Print.
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