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.
To conclude this analysis, it can be noted that any increases in the prices of fuel will increase Australia’s economy as a whole, in other words the higher the costs of logistics will increase the price of products (Australian Competition & Consumer Commission 2014). The consumers will have to handle the burden of having higher costs of products, which would create an inflation. With the increasing price of fuel, consumers might want to alter their lifestyles, such as using public transportation or even carpooling. Vacations and travelling will also have to be cut down. Australia requires further government intervention to control the price of fuel by subsidizing so that inflation may be curbed.
Regular gas nationally now averages around $2.65 a gallon, compared to $3.45 a year ago. Now the law of demand states consumers will buy more of the product if the price falls; of course when gas was at it's lowest peak everyone was driving around with there a/c on. They would use gasoline more often since it was not hurting their pockets as much. Now there is some instances where other goods and services can drop from gasoline prices. This can include a lawn mowing services and automotive business.
To understand the increase in gas prices, one must first identify the distribution of dollars paid per gallon at the pump. According to the U.S. Energy Information Administration (eia) in 2010, the annual average paid at the pump consisted of 68% crude oil, 7% refining, 10% distribution and marketing, and 15% taxes (see Fig.1). This shows an increase of crude oil over the 2000-2009 average of 51%. (e. I. Administration)
the farmers. America's public needs to be able to spend less on gasoline. Ethanol gasoline would be a sure way of lowering prices. The ethanol that is produced in these plants comes form the corn produced by farmers. The finished product from the plant is completely safe for all gasoline automobiles. The cost that it would take to get the ethanol plants started would be worth the money. Ethanol plants will be expensive to start but they pay for themselves over a few years. Although gas prices might not fall ...
Fuel prices is an area of concern for the motor carrier industry. Fuel prices are at an all-time high, driving the industry to make drastic changes. Individuals in the industry believe that by reducing the demand for fuel is the best way to address the current fuel issue. One of the leading alternatives to this fuel issue could be natural gas.
If everyone else in the world is paying a lot more for gas, why shouldn't
The main reason for the price increase is that OPEC (Organization of Petroleum Exporting Countries) has decided to cut back on its oil production. What is the reason for this? Simply stated, OPEC knows that they have the United States under their control in terms of what price they want to sell crude oil to us at, and how much they want to ship. With the present economic prosperity in the U.S., it didn’t take long for OPEC to seize the opportunity to make more money by cutting production of crude oil, and thus forcing consumers to pay more for fuel. Just how much higher are prices you ask? “Crude-oil prices in early March hit $34 a barrel, while a year earlier it was selling for $12 a barrel, which is nearly a 75% price increase since last year. This equates to an additional 48 cents a gallon” (Logistics Management 15).
Gas prices rise and lower at very fast rates every month. According to a 2012 report by The Huffington Post, the average human will spend two thousand dollars to fill up their tank every year. Electric cars will turn that statistic into zero dollars a year for certain people that have made the switch. According to Mary Kathryn Campbell, “The average cost of electricity in the US is 12 cents per kWh. Therefore, the average person driving an average EV 15,000 miles per year pays about $540.00 per year to charge it.”
The gasoline has reached a dramatic increase After the Bush administration took power until today is 120% increased from $50 to $60 average a barrel.
record. The spike in oil prices, up by over 60% since the start of the
I do believe that gasoline is very inelastic. The reason I say that gasoline is an inelastic product is because changes in prices have small influence on its demand. For example, even if the price of gasoline triples the next day, people will still buy gasoline to get to their destination. Current prices on gasoline are likely to have a larger impact on consumer spending, and a smaller impact on the quantity of gasoline bought. Instead, gasoline prices would most likely affect other areas of spending like entertainment, electronics, vacations, and etc. In the short term, it would be difficult to reduce gas consumption. It would be much more profitable to cancel “road trips”, or buy a car with better gas mileage. However, some people aren’t
The article by Mike Moffatt shows the price elasticity of demand for gasoline. According to Molly Espey the average price elasticity of demand for gasoline in the short- run is-0.26 and -0.58 In the long-run, which is a 10% raise in the price of gasoline lowers quantity demanded by 2.6% in the short- run and 5.8% in the long- run.Also, there are a studies were conducted by Phil Goodwin, Joyce Dargay and Mark Hanly at review of income and price elastics in the demand for road traffic and each of them has different study. Furthermore, the realized elasticities depend on factors such as the timeframe and locations that the study covers. If the gas taxes will rise, will cause consumption to decrease.
Finally, many car companies make more efficient cars and hybrid cars. Companies trying to boost their sales through efficient cars and lower gas cost for the consumer. Because of the higher prices of gas consumers are looking for more efficient cars. Gas prices left big companies like Ford, Toyota, and Dodge slow which it had a direct effect in the economy and the workforce. Many people lost their jobs over the passed six months because of the effect of the slow economy.
One can also now understand how the price of oil has a direct and indirect effect on the United States economy. Not only does the price of oil affect gasoline, it affects many other attributes of the economy. Consumers are saving on average $700 and they are reinvesting about $560 of their savings. Industries, as well as the trade deficit bear the burden of oil prices. With the price of oil lower refiners see a profit increase. Oil Storage Company also see a profit in the amount of $0.60 in just one year. The price of oil is also being affected by the increasing amount of oil being produced in the United States. Both of these are directly impacted by the price of oil for the good and the bad. Oil prices also have a direct impact on how much the United States economy grows and it also has an impact on Gross Domestic Product. The currency rate and the exchange also have a direct impact based on the price of oil. Thus the price of oil has a bigger impact than one may be led to believe. So the next time you are at the pump think about how oil has an effect on everything and everyone around
Gasoline has become a necessity to almost everyone. It only takes stopping at a gas pump to see that the prices are continuing to rise. Across the country drivers are feeling the strain on their wallets every time they have to fill up. Commuting to school or work is becoming more costly, forcing people to change their lives to deal with the rising prices. So what causes the constant rise in gas prices? We can blame supply and demand, the United States dependency on foreign oil and the process need to produce gasoline. What are the effects? High demand but not a lot of supply. This means there not enough refineries producing gasoline. Without gasoline people can’t make it through their daily