Norman Daryl O. Esponilla
Campoy Ana. (2008). "Gas Prices Spur Drivers to Cut Use to Five-Year Low" . Wall Street Journal, July 2008, Page A3 Summary The dramatic increase in the price of oil has been the most significant factor relating to the increase in the price of gasoline. The high price of oil is a simple case of supply and demand. The supply of oil has not increased in proportion with the increase in demand. Demand for oil has increased worldwide as countries like China and India, as well as other developing countries, are dramatically increasing their demand for oil. This demand, coupled with investors who are seeking to invest in commodities such as oil due to the weak dollar, are driving oil prices up. The cost of gasoline is not solely based on the price of oil. The price of gasoline also includes the taxes, the cost to refine oil into gasoline, the transportation costs, and the profit of the gasoline dealer.
Stocks of gasoline grew by almost one million barrels which means there will be plentry of gasoline available.
The weaker demand of gasoline, combined with plentiful gasoline supplies, could eventually lead to lower prices at the pump.
In April, gasoline demand was down and this has made for one of the weakest summer driving seasons in years. A survey commissioned by Discover Financial Services found that 62% of respondents are changing their holiday plans because of the higher gas prices, while 15% canceled vacations.
However, declining gasoline consumption in the U.S. has done little to deflate gasoline prices at the pump so far. The problem is that demand for other fuels, namely diesel, continues to be strong. This is helping to keep oil prices high.In the U.S., demand for diesel and similar fuels is up almost 6% from last year. Elsewhere in the world, especially in developing countries such as China, the growth of diesel demand is stronger.
Diesel prices have climbed more than gasoline, gaining 65% to a national average of $4.81 a gallon in the past year, compared with a 38% rise in gasoline.
“Diesel is going to remain the fuel of choice in transportation,” says Francisco Blanch, head of global commodity research at Merrill Lynch & Co. “We still see strong demand for air travel, for trucking and for trains.”
Eventually, analysts expect higher fuel prices to erode demand in emerging economies, as well. There are signs that this is starting to happen as governments reduce the subsidies that had kept fuels inexpensive. But it could take time before oil prices reflect this.
1. What aspect of article were particularly relevant to economic theory? The stock of gasoline grew for almost one million barrell which means there will be plenty of gas available. The weaker demand, combined with plentiful gasoline supplies, could eventually lead to lower prices at the pump. But the problem is that the demand for other fuels, namely Diesel, continues to be strong. Increase in demand for other substitute like Diesel could lead to increase in price thus , this is also a help to keep oil at high price. The demand and price of one item could affect the similar other items.
2. How do you foresee yourself using these ideas in the future? If ever someday i could make my own business or let's just say that i already have my own business, by knowing some concepts and theories in economics, i can say that i can cope up and compete using strategies with other competitors/firms. I could utilize and apply these ideas in order for the company to earn profit than loss.