...What Causes High Gas Prices? There are various factors that play a role in the price consumers pay at the pump. The major cause in the fluctuation of gas prices is crude oil. Crude oil is that main ingredient involved in the manufacturing of gas. One body that has great influence over the worldwide price of oil is the Organization of Petroleum Exporting Countries (OPEC). OPEC is made up of twelve of the world’s biggest oil-producing nations which include: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. Since OPEC’s nations produce so much of the world’s oil supply, they can control the level of production. Oil is one of the world's most important commodities, and as a result, the nations that control the majority of the world's supply have a great deal of power over its availability. In addition, conflicts such as war in an oil-producing region can also bring up the price of gasoline. Andre Gerolymatis, a history professor at Simon Fraser University, says political upheaval in Ukraine and Russia's military incursion into Crimea could be putting pressure on prices. The reason, of course, is that 40 per cent of Europe's gas and oil comes from Russia, and it comes through the Ukraine. So there's the potential that this could be disrupted, and that means that the Europeans would have to go elsewhere for gas, and that would drive the prices up. (Bains, 2014) Bibliography Bains, M. (2014, March 5). Russia-Ukraine...
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...Causes of High Gas Prices in the United States 27 October 2011 Abstract Prices at the gas pumps, in the United States, are forcing many to cut back on household items and other necessities, in order to be able to afford to drive to and from work. This paper will discuss the causes and effects of rising gas prices in the United States. Rising Prices The main stream media and the government would lead you to believe that the rising gas prices are a result of poor planning, greed, and too little government regulation. While those factors may play a small role in the inflated prices, what it really boils down to is the basic principles of supply and demand. The lack of alternate energy sources, the growing need for gas in other countries like China and the limited number of oil refineries in the United States keep the demand high. Since Economics teaches us that there is a positive relationship between demand and prices, we know that if the demand is high the prices will remain high. Couple this is the monopoly OPEC, Organization of Petroleum Exporting Countries, has established, allowing them to in reality, set whatever prices per barrel they choose. OPEC is responsible for over a third of the world's oil production, giving it the power to strong arm countries like the United States and Canada into paying outrageous amounts per each barrel (Carollo, 2012). When the prices do not move as they anticipate them to, they manipulate the market by creating imaginary gas shortages...
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...Business Economics Instructor: Francisco De Cossio July 21, 2013 I. Exercise 1 New Jersey gas prices have been rising recently during the summer months. New Jersey residents frequent the Jersey Shore towns starting sometime in May till almost October during the year. The most visited times are July and August. Usually sometime during those months, gas prices will fluctuate the most. Currently, gas prices have risen about 18 cents. Prices could have gone up more, however New Jersey’s gas tax has kept it from going even higher (AP, 2013). Gas prices can go up in NJ during the summer months due to the high demand for gasoline during that time. You can usually find the Garden State Parkway flooded with motorists on Fridays in the summer months of residents going down the shore for the weekend. Saturday mornings can have the same issue because of residents going down the shore for the day. The amount of cars on the road means more gas is needed meaning demand will rise. There is also a supply issue with gasoline. Unrest in the Middle East, where many of the barrels of crude oil where our gasoline comes from, causes supply to change frequently. Currently it is causing the supply to go down. Reducing the gasoline supply will also cause price to increase as demand for gasoline still exists and consumers still need gasoline to drive. This will cause gas prices to increase since there will be less coming in from other countries (Friedman, 2013). II...
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...Individual Paper- Gas Prices Petroleum gas affects many of us when it is constantly increasing and decreasing all the time. Over the past few years gas prices have varied from $3.11 a gallon to $3.97 a gallon. Petroleum gas prices do not just affect the companies that provide the product but affects the people of the United States. When gas prices increase it can cause many problems with people getting to where they need to go. Many people cannot afford the prices with jobs they have now, which causes them to miss days of work causing them to lose their jobs. Petroleum gas can affect many people even farmers when it comes time to take care of their crops causing many people not getting the products they need. When all these people cannot afford the prices of gas they tend to change how they are doing these things. For an example farmers not being able to process their crops can cause them to have to have smaller crops. This will lead other products from their crops to rise in prices when it goes to the stores. Market equilibrium in this case refers to a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers (Colander, 2010). The constant changes in gas prices will affect the product itself along with the market and equilibrium prices. When the price in gas increases the demand for the gas will lower due to the amount it takes to fill a person’s...
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...different elements that contribute to rising gasoline prices. The major cause for increasing gasoline prices has to do with refining capacity. Even if oil were inexpensive, we would still have a problem converting it into the gas that fuels our economy. That is what keeps the gas prices high. When gas supplies are short, due to an “inability to refine crude oil into gas efficiently,” prices increase. This is a component of supply and demand economics. In a positive aspect, rising gasoline prices do serve a purpose; they curtail usage so that we do not eventually run out of fuel. If gasoline continued to retain its cheap price, despite how much was available, people may pull up to their favorite gas station only to see caution tape around the pumps because frequent consumers would not curtail their consumption. Contrary to what some think, gasoline isn’t the only product refined from crude oil. In his article “Gas Prices Rising”, Matt Rosenberg wrote that, “Only about 51.4% of an oil barrel is used to make gasoline; the rest of the oil is used to make other products such as jet fuel, asphalt, road oil, heating oil and liquefied refinery gas” (Para 3, Rosenberg). This makes oil a high demand commodity around the world and because most countries don’t produce enough oil of their own, they have to import it from other countries that have more than they know what to do with. This also creates a global market in which prices can fluctuate depending on who needs oil and how much...
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...Everyone’s Gasoline Problems Fluctuating gas prices can be caused by a number of factors. The price of crude oil and the cost of producing and marketing gasoline have greatly impacted the fluctuation of gas prices that we experience on a daily basis. There has been a significant increase demand for oil worldwide, including growth in other fast developing nations. These nations have significantly grown in the number of citizens who have access to automobiles, and their increasing populations have a strong impact on the amount of crude oil (Forbes, J). The demand for gasoline has increased significantly, due to economic growth. Also, seasonal changes can pose a serious impact on gas prices. Gas prices increase greatly during the holiday seasons and summer because American’s travel increases during these times. For example, the American gas demand increases in the summer season, resulting in higher gas prices during these times (Forbes, J). When the price of gasoline goes down people will buy more creating the demand but due to lowered price gasoline station owners will be discouraged to supply more of gasoline. If the price of gasoline goes up, demand will go down while the sellers will try to supply as much as they can. Just in the last month in Virginia Beach, Virginia, gas prices have risen 19 cents and over the last 3 months it has fluctuated within 49 cents (GasBuddy.com). Chapter 3 Q.14 When Starbucks introduces their premium...
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...Gas prices have been on a rapid rise the last few years and not many people are happy with it. It limits those on a budget for how much they can do and how much they are willing to drive. Lately, gas prices have been fluctuating in price and going up but are more recently going back down, which gives people a little more flexibility at times in their schedule. It lets people do things such as travel and more, that they were not able to do last summer when gas prices were right around as well as over $4.00 a gallon, which made people cut back on those unimportant things. Supply and demand plays two major factors that have an impact on what we might see gas prices at. Ash says, “Gas prices are expected to continue to drop leading to Election Day and continue to fall through the end of the year (Richardson, 2012).” According to Clifford Krauss, oil experts have been talking about how since Israel and Gaza are not oil-producing areas, that we should not see oil prices spike up and cause us to pay more for a gallon of gas (Krauss, 2012). As gas prices have been steadily increasing, it has had a negative effect on the consumers that use it daily. According to Jim Motavalli, “the main five reasons as to why gas prices have been on the steady rise can be related to demand, global politics, speculation, seasonal, and fuel-efficient cars (Motavalli, 2012).” The seasonal reason really gets to everyone who drives, because gas prices increase in the summer that causes less travel. People...
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...Lithuania pleads for US gas exports to counter Russia Russia has a big dominance in the European market of Natural Gas. Many countries are highly dependant on Russia’s exports of natural gas. Lithuania, in this case, is completely dependant on Russia’s natural gas. Russia has taken advantage of this and has abused of their “monopoly” power. Lithuania has to pay 30% more for natural gas than it`s market price. This article addresses this problem and states that Lithuania is “ beholden to a monopoly supplier”. This monopoly occurs as one single firm (in this case a nation) dominates the market for which there are no close substitutes. Also there are high barriers of entry and exit, in this situation as the article quotes a US senate; “ a law enacted in Lithuania some 75 years ago “ makes such barriers so high. These high barriers as the graph below will show, allow long run abnormal profits to be made. Adding to this, the high price Lithuania has to pay is due to the fact that monopolies have power to set prices; they are price makers. Such price setting allows them to reduce output and increase price to maximise profits. This allows them to make abnormal profits/ super normal profits. qm pm qm pm In the monopoly diagram above, we can see that in order to maximise profit, Russia would produce (in this case export) at MR=MC. This, added to the fact that AR > AC, would cause them to have abnormal profits as the shaded area shows. This reflects the situation between...
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...January 2015 Current Gasoline Prices The supply of gasoline is largely determined by the price of oil. The price of oil can be affected by both supply and demand. Things that affect the supply of oil include wars, terrorist attacks, industrial accidents, weather near offshore drilling rigs and the actions of oil cartels such as OPEC. If any of these things interfere with the supply of oil, it may cause the price of oil to rise, and therefore cause the price of gasoline to rise. In the current state, the market is flooded with oil supply and manufacturing seems to keep on producing. When the market is flooded, the gas prices fall, as in our current case, fall drastically to numbers we haven’t seen in years. We have not seen a decline this drastic since the 1980’s. Demand also affects the price of oil. Increasing demand for oil by developing countries such as China and India can cause prices to rise. Financial speculators can also influence the price of oil. They do this by buying oil in anticipation of future gains in the price of oil. If many speculators buy oil, the oil price will rise rapidly. These occurrences will increase the price of gasoline. If the price of gas falls, consumers spend less of their money on gas. Consumer incomes do not vary at the same rate as gas prices. The price elasticity of demand for gas is very low, so demand for gas will remain fairly constant, even for large changes in the price of gas. The most important impact the price of gasoline has on the economy...
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...BADM 103-3977 Business Abstract #2 With the steady rise of gas prices across the country, people are buying less fuel for their use. Compared to last year’s statistics, Americans have bought less gas for the past five weeks. December was the last time there was such a low demand for fuel, but this was because the snowstorms caused Americans to cut back. Before this current decline, the demand for fuel was on the rise for two months. Analysts expected the trend to continue due to the economic recovery improving, but according to a March survey by the Oil Price Information Service, sales have fallen at 70 percent of the nation’s major gas station chains. Even as gas prices continue to rise, people are still having issues with saving. This is because the cost of gas is going up faster than people can cut back on spending. Compared to last year’s prices, gas is 32 percent more expensive than it was in April 2010. The price of fuel has risen due to unrest in North Africa and the Middle East causing an increase in global demand for crude oil which squeezed the supply. Majority of the analysts forecast a high of $4 a gallon but some foresee $5. Drivers across the country are hunting for cheaper gas, some using the help of a mobile phone app. Other drivers are starting to consider the mass transportation systems within their area. There are also owners of SUVs trading them in for more fuel efficient models. This is evident with sales of the Hyundai Sonata and Elantra...
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...FRACKING: GOOD THING Natural gas is rapidly emerging as a major fuel of the world economy, meeting the rising requirements of natural gas is hard to achieve. Fracking is one of the most important technologies for natural gas production. Fracking has been used widely in oil and gas industry for decades; it is a technique used to get gas and oil from shale rock. The process of fracking is injecting the mixture of water, sand and chemicals into the rock at a high pressure to release gas (BBC, 2013). Fracking technology experiences long time of development. In 1947, Stanolind Oil conducted the first experimental fracturing to stimulate natural gas; in 1949 Halliburton conducted the first commercial fracturing to extract natural gas (Montgomery and Smith, 2010). Until 2003 fracking was used widely, energy companies actively expand natural gas exploration in Texas and Pennsylvania (Eecworld, 2010). fracking played an important role in America's natural gas resources for many years and countries such as Canada, England and China are actively pursuing implementation of fracking. Nationally, fracking can boost energy industry and promote economic grow in countries. However, like any advanced technology, it can also raise environmental concerns, cause water and air pollution. Therefore, whether the advantages of fracking worth the disadvantages? Yes, it worth. fracking is good, so it should be used on a massive scale to contribute to the increasing demands of energy. There are three economy...
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...High Fuel Prices and its Effect on the U.S. Economy The United States economy as a whole has been rapidly dwindling down of late, from its all time high marks in the late 1990’s and early 2000’s. Many Americans believe that the cause for this large downswing in the economy is due to the fact of the cost that the United States is putting into the War in Iraq. The war has caused some economic inflation over the past couple of years however; there are other factors that tie into the economic problem of America. One key factor that many people are surely aware of is the high and outrageous gas and fuel prices across the country. Though many Americans are aware of the extremely high gas prices, they don’t fully understand how fuel prices have a monopoly effect on the country and how the U.S. economy is greatly affected because of this. (How Gas Prices Affect Our Economy) Over the past few years gas and fuel prices always seem to be in the news. At first, prices seemed to be high one week and low the next. Now, it just seems that the prices are extremely high and won’t go down. Many times you hear big time politicians say the reasoning for these high prices is due to shortages of oil. This is not the case, for there is no shortage at all. Gasoline reserves on hand are at the highest levels they have been since the early 1990s and the oil deposits under ground aren’t running out either. (There Is No Gas Shortage – BusinessWeek ) So why are politicians saying there is a shortage...
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...Everyone’s Gasoline Problems Fluctuating gas prices can be caused by a number of factors. The price of crude oil and the cost of producing and marketing gasoline have greatly impacted the fluctuation of gas prices that we experience on a daily basis. There has been a significant increase demand for oil worldwide, including growth in other fast developing nations. These nations have significantly grown in the number of citizens who have access to automobiles, and their increasing populations have a strong impact on the amount of crude oil (Forbes, J). The demand for gasoline has increased significantly, due to economic growth. Also, seasonal changes can pose a serious impact on gas prices. Gas prices increase greatly during the holiday seasons and summer because American’s travel increases during these times. For example, the American gas demand increases in the summer season, resulting in higher gas prices during these times (Forbes, J). When the price of gasoline goes down people will buy more creating the demand but due to lowered price gasoline station owners will be discouraged to supply more of gasoline. If the price of gasoline goes up, demand will go down while the sellers will try to supply as much as they can. Just in the last month in Virginia Beach, Virginia, gas prices have risen 19 cents and over the last 3 months it has fluctuated within 49 cents (GasBuddy.com). Chapter 3 Q.14 When Starbucks introduces their premium...
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...Gas Prices have many different effects in our society the effect it have is mostly negative. Everyday our lives depend on gas, when we are going to school, work or just going out for leisure time. The effect of gas are very affecting in our lives because of many ways gas is used in. There are many different negative effects of rising gas prices families will cut back on vacations or people may take different ways of transportation such as bus or train. People that were born after the 90s the gas prices might not seem like a big deal to them because though out the years is always raised up people became used to it . During the early 60’s gas prices were very very cheap. Gas prices back in those days were only about 30 cents a gallon. Then over the decade it raised only five cents more. Then in the 80s the gas crisis bumped the price of gas up $1.30. The major problem gas prices are so high are because the prices placed on crude oil. This ties into taxes other financial problems causes the gas prices to go up so fast. In reality gas is like a business as it runs as the idea as supply and demand. The price of the oil is up to investors if they feel if gas goes higher they bid to a higher point. If they bid high we pay a higher prices at the pump. During the times of summer and spring it become a rise in gas prices. This is due to people making frequent trips over the summer and the gas prices are going to go up. Gas prices can be affected by a whole...
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... Page 3 Consumer Response to Changes in gas prices Page 3 Price Elasticity Page 4 Suppliers Response to Price Changes Page 4 Equilibrium Prices under low price elasticity Page 5 What Causes Gas Prices to Increase Page 6 Opportunity Cost Page 7 Conclusion Page 7 Introduction Prices are set by demand and supply. When supply falls, prices rise quickly. The demand for oil continues to hit a record high. Countries like China and India are consuming it more frequently as they industrialize, but cars and power factories. However, the supply of gasoline has been restricted by certain requirements forcing oil refiners to manufacture different gasoline for an assortment of purposes. The price of gasoline reflects producers’ costs and consumer’s willingness to pay. Gasoline prices tend to rise if the cost to produce and supply such commodity rises, or if people decide to buy less gas at the current price (when supply is greater than demand). The price of gasoline will stop rising or falling when a price is reached at which quantity demanded is equal to quantity supplied by producers, otherwise known as equilibrium. Consumer Response to changes in the price of gas 3 The rising price of gas will affect consumer spending rather than significantly impacting the amount of gasoline being purchased. The major aspect of the consumer life affected by the spike in gasoline prices is the change made to their expenditures...
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