The year 2004 has seen a steady climb in the price of gasoline. From
January of 2004 to May of 2004 there has been a jump of approximately
.50 cents a gallon (Energy Information Administration). For many
Americans high gas prices have been a hot issue with them, and there
seems to be no rhyme or reason to these fluctuations. With the
continued popularity of the sport-utility vehicle and the high volume
of gasoline it requires, the issue of high gas prices doesn’t seem to
be going away anytime soon. Many factors go into determining the price
of gasoline. This paper will explore the various factors involved to
determine the price of gas and attempt to gain a better understanding
on how it arrives at its decision.
The gasoline industry is an oligopoly. In Mark Hirschey’s book called
Fundamentals of Managerial Economics an oligopoly is defined as, “A
market structure characterized by few sellers and interdependent
price/ output decisions”. This market structure only allows a few
large rivals to produce the majority of the industry’s output (404).
The oligopoly controlling the gasoline industry is the Organization of
the Petroleum Exporting Countries (OPEC). OPEC consists of 11 oil
producing countries: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela,
Qatar, Libya, United Arab Emirates, Algeria, and Nigeria (OPEC.org).
These countries control gas prices by the amount of crude oil they
produce. To gain a better understanding of how the United States gets
its gasoline and who supplies it, we will have to take a closer look
at the degree of competition.
Because of the nature...
... middle of paper ...
...uly 2004.Website. 6 Dec.2002. <
Bonsor, Kevin. “How Gas Prices Work.” HowStuffWorks. 30 June 2004
Website. 29 June 2004
“Strategic Petroleum Reserve-Profile” Office of Fossil Energy 1 July ,
2004. Website. 1 July 2004
Mitchell, Andrew and Oweis, Khaled, Reuters “OPEC Prepares Oil; Deal
to End $40 crude Prices.” AOL Business News. 3 June 2004 Website. 3
Lott, Trent. “A $100 Fill-Up?” Truth News 30 June 2004 Website 28 May
“US Fuel Tax Rates By State.” ClevelandGasPrices. 28 June 2004
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