...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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... 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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...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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...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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...Introduction: I get the main idea of the essay, but it was very confusing. "In today’s society since the 1900s the rise of gasoline prices got a lot of Americans upset about the rise of the price for gas they saying that the economy went over bored with the price that’s being held at local gas business." Thesis: The main problem with American is that the whole complete consumption that’s all over the world about these high gas prices the number one thing we could do about this problem is for us Americans to confine the big amount of gasoline that is being use for our cars, or we could just get as many people to sign up and do a whole lot of partition door to door about the issue and get people to vote and complain about the high price of gasoline and the cause of it being so high such as the price for oil. -This is more of a call to action than a thesis.- A Well-Presented Issue: This issue of high gas prices is controversial. Statistics and authorities have been paraphrased to present the issue. " In Septembers of 2011 a gallon of gas in New York State only went up just 50 cent in Colorado it increased on 25 cent. Some of the increase is only because of the different tax rates only in two states but due to some bargain the price of oil coming in from a different country such as CanadaThe president of the united states Mr. Obama stated in the source since the price of gasoline has went up there will be more jobs issued out to a lot of Americans so that they could put more money inside...
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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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...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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...How Crude Oil Prices Affect Gas Prices Crude oil prices make up 71% of the price of gasoline. The rest of what you pay at the pump depends on refinery and distribution costs, corporate profits, and Federal taxes. Usually, these costs remain stable, so that the daily change in the price of gasoline accurately reflects oil price fluctuations. (Source: EIA, FAQ, December 6, 2013) It usually takes about six weeks for oil price changes to work their way through the distribution system to the gas pump. Oil prices are a little more volatile than gas prices. This means oil prices might rise higher, and fall farther, than gas prices. Historical Oil and Gas Prices: Oil and gas prices have been especially volatile since the 2008 financial crash. Here's a look at their peaks and valleys, and what caused the price swings. * 2014 - Prices remained around $100/barrel. That's because the U.S. has plenty of shale oil. 2013 - Oil rose swiftly to $118.90/barrel on February 8, sending gas prices to $3.85 by February 25. Prices had started rising earlier than normal thanks to Iran's threatening war games near the Straits of Hormuz. What Causes High Oil Prices?: Like most of the things you buy, oil prices are affected by supply and demand. More demand, like the summer driving season, drives higher prices. There is usually less demand in the winter, since only the Northeast U.S. uses heating oil. However, oil prices are also affected by oil price futures, which are traded on the commodities...
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...because they deal directly with the overall market, not anything individual. The demand curve is downward sloping, and that quantity demanded increases as the price decreases- that is when you move down the curve. GoodLife could increase the quantity demanded of its rented apartments only be reducing the rental rate. The supply curve is upward sloping and quantity supplied increases with an increase in price- that is, as you move up the supply curve. An increase in rental rate would cause GoodLife to lease out more apartments. Quantity demanded equals quantity supplied only at the equilibrium point. At prices below equilibrium, the quantity demanded exceeds quantity supplied, and there is a shortage in the market. That is, consumers are willing to buy more than producers are willing to sell at this price. This causes price to increase. As price increases, quantity decreases and quantity supplied increases. This adjustment process continues until equilibrium is attained. Similarly, at prices above equilibrium, quantity supplied exceeds quantity demanded, and there is a surplus in the market. Producers are willing to sell more than consumers are willing to buy, which exerts a downward pressure on price. The price continues to decrease until equilibrium is attained. Demand and supply are not static; various factors cause them to increase or decrease. For instance, an increase in population caused demand for...
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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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...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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...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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...Tobacco and Pollution cause Lung Cancer cases Many people who suffer from Cancer have lived in the environment with lost of toxins around them. There are many sources of such toxins, and some of them are Tobacco and Car emissions. The government has recently tired to prevent people from smoking, In 2009 President Obama came out with an act called Tobacco control Act of 2009 and said, “ The legislation takes measures to prohibit tobacco companies from marketing to children such as making candy flavored cigarettes. It also further limits misleading advertising such as the use of word such as "light" with tobacco products.” As you can see that the government of America and also the government of Canada are trying their best to prevent young people and old from smoking and preventing the retailers selling tobacco to people under age or below 19-20. As I was researching for my project, I came across very interesting articles but they were all different from each other, some said that tobacco and pollution (car emission) are the cause of Lung cancer cases, or that no they are not, or that the rates have gone up for tobacco and car sales, or some would say they haven’t. I tired my best to collect the best of the best. It is suspected that tobacco with its negative reputation that is the larger causes of lung cancer, but other says that car emission is also a cause of lung cancer, so I decide to pick this study and find that data’s for which is really the cause of lung cancer or nether...
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...the record high of about 142.35 billion gallons (or 3.39 billion barrels) consumed in 2007. 1There are 42 U.S. gallons in a barrel. The world’s demand for oil increased sharply for several years, peaking at 86 million barrels per day in 2007. However, the global economic slowdown in recent years reversed this trend and demand fell for two consecutive years to just 85 million barrels per day in 2009, or 1 million barrels per day less than at its peak before rebounding in 2010. The Energy Information Administration expects growth to accelerate over the next two years reaching 88.8 million barrels per day in 2012 and nearly 89.7 million barrels per day in 2013. The EIA projects consumption in the Organization for Economic Cooperation and Development (OECD) countries to be nearly flat in 2012 and 2013. Growth is concentrated in the non-OECD countries, including China, Brazil, and the Middle East with world gains of about 0.8 million barrels per day expected in 2012 and another 0.9 million barrels per day in 2013. Price Elasticity of Demand for Gasoline A meta-analysis by Molly Espey, published in Energy Journal. Espey examined 101 different studies and found that in the short-run (defined as 1 year or less), the average price-elasticity of demand for gasoline is -0.26. That is, a 10% hike in the price of gasoline lowers quantity demanded by 2.6%. In the long-run (defined as longer than 1 year), the price elasticity of demand is -0.58; a 10% hike in gasoline causes quantity demanded...
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...with parents paying well over the retail price just to make their children happy. Then, in January, stores reduce the prices of their remaining holiday items – cards, decorations, and so on. Why do parents – and stores – behave this way? The answer is in the laws of supply and demand. Together, these laws give us strong clues about what to produce, how much to produce, and how much to charge. Because supply and demand play such a central role in our economy, it's important to understand how they operate – and how you can use them to analyze decisions about price and quantity. The Law of Demand Demand, in economic terms, shows how much of a product consumers are willing to purchase, at different price points, during a certain time period. After all, we all have limited resources, and we all have to decide what we're willing and able to purchase – and at what price. As an example, let's look at a simple model of the demand for a good – let's say, gasoline. (Note that this example is illustrative only, and not a description of the real gasoline market.) If the price of gas is $2.00 per liter, people may be willing and able to purchase 50 liters per week, on average. If the price drops to $1.75 per liter, they may be able to buy 60 liters. At $1.50 per liter, they may be prepared to purchase 75 liters. Note that while some gas usage is essential – driving to work, for example – some use is optional. Therefore, as gas prices drop, people may choose to make more optional...
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