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Supply And Demand of Gasoline

opinionated Essay
1019 words
1019 words
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Supply and Demand: Gasoline

I am a husband and a father of four lovely children. We need a large vehicle to haul all of us around town. And of course I would do anything to keep them safe and I always want to provide them with the best. Therefore, after the birth of our fourth child two and a half years ago, my wife and I decided to upgrade our Ford Explorer to a Ford Expedition. We got everything from the side-curtain airbags to the TV and DVD player. What we did not know was we also purchased a rather large unleaded gas bill. The first time we filled the tank it cost us roughly $35; today it costs us right around $75 to fill the tank. Obviously the price of gas has increased significantly in the last two years. The price increase is due to a fluctuation in the supply and demand of not only gasoline but also crude oil, which is needed to manufacture gasoline. In addition, several other factors are influencing a change in the price of gasoline.

In 2004, crude oil producers around the world expected a 1.5% growth in the world’s demand for crude oil. The actual growth rate was more than double the projections at 3.3%. This growth was due to rapidly industrializing of foreign countries such as, China and India. Therefore the lack of crude oil affected the supply of gasoline to consumers at the pump.

Another factor contributing to the supply of gasoline was unexpected production difficulties. During 2004 three unrelated events had a significant affect on the supply of crude oil. The first were the Insurgent attacks and the war in Iraq. It made it very difficult to properly export the oil. Many of the Iraqi refineries simply stopped production during this time.

The next event was the Gulf Coast hurricanes in 2004...

... middle of paper ...

...oline is affected by many different factors. The biggest factor is crude oil, but the supply and demand of crude oil will ultimately determine the price of gasoline. The supply and demand of crude oil and gasoline are also affected by several factors. The price is continually increasing and the supply is becoming harder to produce and deliver. So it seems we, the United States, need to find a way to slow down our fuel consumption and decrease our demand. This may be the only way to bring down the price of gasoline. I know I would not mind, because then I could use the extra $40 to buy a couple more DVDs for the kids to watch while we are running around town in the Expedition.

Reference:

Federal Trade Commission. July 2005. Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition. Retrieved from http://www.ftc.gov/opa/2005/07/gaspricefactor.htm.

In this essay, the author

  • Explains that the price of gas has increased significantly in the last two years due to a fluctuation in supply and demand of not only gasoline but also crude oil.
  • Explains that in 2004, crude oil producers around the world expected a 1.5% growth in world's demand for oil. the actual growth rate was more than double the projections at 3.3%.
  • Explains that unexpected production difficulties contributed to the supply of gasoline. the insurgent attacks and the war in iraq made it difficult to properly export the oil.
  • Explains that the gulf coast hurricanes in 2004 disrupted the output of crude oil in u.s. refiners. the workers strike in norway severely affected production.
  • Compares the u.s.'s consumption of gasoline and crude oil over the last twenty years.
  • Explains that the price of gasoline is affected by many different factors, but the biggest influence is crude oil. the federal trade commission conducted a regression analysis of the u.s.
  • Explains that the importing of crude oil affects gasoline prices. the u.s. refiners import 60% of their oil supply due to depleting supplies.
  • Explains that the clean air act requires that certain geographical areas have various blends of gasoline until the area has met a particular set of clean air standards.
  • Explains that state taxes drive up the final price of gasoline. in 2004, the average state tax on gasoline was $0.225 per gallon.
  • Opines that the united states needs to slow down its fuel consumption and decrease its demand.
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