...gasoline problem The fluctuation in gas prices can be caused by many different reasons. One reason has to do with the economic growth of other countries and their demand for oil. Just like the book says, as demand for a product rises than the price for that product will do the same. Countries like China, India, and Brazil are making an economic growth that’s required more and more energy. Because most of the world’s oil comes from the same place, their growth impacts our gas prices as well. http://www.financialnut.com/why-are-gas-prices-rising/ Here is a chart of what is the Dow Jones Industrial equivalent for Brazil. This chart shows that Brazil has reach a very high economic growth and are at a point where their demand for energy is extreme as well. Other factors that play a part is the fact that gas prices rise and fall as crude oil does. http://gasbuddy.com/gb_retail_price_chart.aspx This chart shows average retail price of oil and gas in Houston. This shows a direct correlation between crude oil prices and the prices we as consumers pay for gas. As crude oil rises and falls so too does the gas prices. Oil and gas is an inelastic commodity. This is why the demand for gas hasn’t really diminished while the price of gas has risen. Because it is difficult to reduce spending on gasoline, the effects of price increases are often shifted to other economic sectors. Some economists estimate that for every one cent increase in the price of gas, spending in other areas will...
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...OIL AND DEVELOPMENT INTRODUCTION Oil is one of the most important resource of industrialized nations. It has various uses like to generate heat, fuel vehicles, manufacturing goods like chemicals, plastics, paints, medicines etc. Oil is a non-renewable resource and thus has limited supply and due to its many uses has very high demand. Earlier price of oil was mainly influenced by OPEC. Organization of Petroleum Exporting Countries (OPEC) is type of cartel which mainly determines price of oil by actual supply and demand and partly by expectation. A Cartel is a group of sellers of a product who have joined together to control its production, sales, and price to obtain the advantages of monopoly. OPEC allows its members to organize their economic policies to guarantee income and influence of oil prices globally. OPEC was formed at the Baghdad conference in September 1960. The first members were Iraq, Kuwait, Iran, Venezuela, and Saudi Arabia. The organization later included the United Arab Emirates, Qatar, Algeria, Indonesia, Ecuador, Nigeria, Angola, Libya and Gabon. OPEC has a unique structure because its members are not companies but rather countries. As these countries have formed a cartel, the market is served by a monopoly as the primary purpose of a cartel is not only to drive up prices, necessarily, but to drive competitors out of the market. The members not only agree to the total level of production but also about the amount produced by each member. OIL PRICE TREND The...
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...This involves the important distinction between “movements along” and “shifts of” the demand or supply curve. Market equilibrium Fig 1: Market Equilibrium Fig 1 shows the market for palm oil. Most of us consume palm oil in one form or another eg in the form of instant noodles, breakfast bars, doughnuts, margarine, crackers, crisps or French fries. Palm oil is also used in the manufacture of skin and body care products, toiletries, cosmetics, candles and soap products. In drawing it, demand is assumed to be at D0 and supply at S0 . As there are many small producers, so market supply curve is upward-sloping – an increase in the market price of palm oil would encourage producers to increase the output of the product. Supply is drawn to be relatively inelastic, on the assumption that it is quite difficult to increase production in the very short run, as it may take some time to plant new trees in order to do so. The market equilibrium will occur when the price is given by P0 and the quantity traded is Q0. This is an equilibrium in the sense that the quantity that consumers wish to buy is just matched by the quantity that producers wish to sell – at the going price. P0 is the unique price at which this balance occurs. Comparative statics Much of the power of the demand and supply model comes in analyzing how this market equilibrium changes if there is a change in market conditions. We can then...
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...Depreciating Rupee: Introduction: Depreciation refers to a fall in the value of the domestic currency which is caused by the demand for foreign currency exceeding its supply in the market. In such a situation one has to pay more than before to get units of foreign currency. This fall takes place in the market and on its own. Market determined exchange rate serves the purpose of aligning the domestic economy with the world economy was the price route. As consequences the domestic price gets linked up with those of the world price. With the liberalizations and globalization of the economy in recent years, imports are bound to increase. The lessening of restrictions on imports and lowering of tariff on imports which the economic reform implies, an increase in imports has in fact taken place. Again with trade having become an important element of the new strategy of growth. As per the basic laws of economics if the demand for USD in India exceeds its supply then it’s worth will go up and that of the INR will come down in that respect. It may be that importers are the major entities who are in need of the dollar for making their payments. Likelihood here could be that the Foreign Institutional Investors are retreating their investments in the country and taking them elsewhere. This can create a shortfall in supply of the dollar in India. This state of affairs can only be addressed by exporters who can bring in dollars in the system....
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...Richardson plant with its closure of the Midland factory. (C)Explain Micron’s decision to buy TI’s plants in terms of differences between the two companies in their expectations of long-run DRAM prices. Answer (a) TI’s sale of the Richardson factory did not change the worldwide longrun supply of DRAMs. Its closure of the Midland factory did reduce the supply. (b) The Midland plant probably had the higher average cost, which explains 2 2200022 391 366 339 Production (‘000 ounces) 314 350 356 why TI could not sell it and had to shut it. (c) No. There might have been other DRAM plants in the United States, but owned by non-US firms. 3.The short-run supply of gasoline has been estimated to have an elasticity with respect to price of 1.61, and with respect to wages of −0.05. (A)Explain why the elasticity of supply with respect to price is positive while the elasticity with respect to wages is negative. (B)How would a 5% increase in the price of gasoline and a 10% increase in wages affect the short-run supply of gasoline? (C)Do you expect the impact to be smaller or larger in the long run? Explain your answer. 4.When the annual Valentine’s Day is coming, the demands for rose flower, chocolate, and love card suddenly increase. Please make comparisons in the change sizes of price and quantity between these products. Explain your reasoning...
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...1. What has caused this major drop in oil prices? The reasons why Oil prices are falling down are twofold, they are due to the simple economics of demand and supply. First of all, we can observe a weak demand in many countries due to insipid economic growth, coupled with surging production. Developing countries and the economies of Europe are becoming less oil dependent thanks to the technology, cars are becoming more energy-efficient. So the demand for fuel is logically decreasing. Added to this is the fact, on the supply side, the oil cartel OPEC is determined not to cut production as a way to prop up prices. Moreover, countries like Saudi Arabia, Nigeria and Algeria are now competing to the Asian markets so producers had to drop prices and USA has gave up the imports as its domestic production has doubled these years. Finally lot of competitors are rising such as Canadian, Iraqi or even Russia and they manage to increase their oil production and exports every year. 2. What economic impact would these lower prices have on the world economy including the USA? Like in every changing situation, there are winners and losers. Consumers all around the world will enjoy a main benefit: less expense for the gas! Low prices are excellent news for oil consumers in places like Japan or the US, where gasoline is the cheapest it's been in years. For example, the price of the gallon, in average, fall from $3.28 a year ago to $2.07 and this drop benefit to lower-income groups in...
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...Business Economics GM545 Spring 2011 Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. By the end of the 6-week period of November 19th –December 31, gas prices in Chicago had risen significantly. In it’s bi-monthly newsletter at the beginning of January 2011, the Lundberg Survey, a report which tracks gas prices, points to Chicago for the highest gasoline prices nationally topping the charts at an average of $3.35 per gallon for regular. With Illinois already high, 58.8 cent gas tax coupled with the city of Chicago’s gas tax of 50 cent a gallon any nationwide increase in gas prices will be even more significant in Chicago (1). Gas prices vary widely from state to state based largely on local taxes placed on the inelastic product. But prices have been trending higher nationwide after an increase in the price of crude oil, the main ingredient in gasoline (2). In Chicago, just as in the rest of the U.S., there was an increase in demand for oil during the period of November 19th –December 31, 2010. This increase in demand is illustrated by the decrease in U.S. crude oil inventories. Between the mentioned period of 6 weeks, crude oil inventories declined by 21.84 million barrels (3). These declines were a result of increases in gas consumptions...
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...bushel of salt a. What is the relative price of butter in terms of wool? 1 pound of butter exchanged for 2 yards of cloth and 4 yards of cloth exchanged for 1 pound of wool. Hence 1 pound of butter exchanged for 2 yards of cloth and 2 yards of cloth exchanged for 1/2 pound of wool. So the relative price of butter in terms of wool was 1/2 pound of wool per pound of butter. b. If the money price of bacon was 20¢ a pound, what do you predict was the money price of butter? 1 pound of bacon exchanged for 1 yard of cloth and 2 yards of cloth exchanged for 1 pound of butter. Hence it took 2 pounds of bacon to exchange for 1 pound of butter. As a result, if the money price of a pound of bacon was 20¢ the money price of 1 pound of butter was 40¢. c. If the money price of bacon was 20¢ a pound and the money price of salt was $2.00 a bushel, do you think anyone would accept Mr. Gregg’s offer of cloth for salt? If the money price of bacon is 20¢ a pound, Mr. Gregg’s offer to exchange 1 pound of bacon for 1 yard of cloth means that anyone could obtain 1 yard of cloth for a money price of 20¢. Mr. Gregg’s further offer to exchange 8 yards of cloth for 1 bushel of salt means that anyone could acquire 1 bushel of salt for $1.60, the price of 8 yards of cloth. If the money price of salt is $2.00 a bushel, many people would accept Mr. Gregg’s offer of cloth for salt because it enables them to obtain salt at a money price of only $1.60 a bushel. 2. The price of food increased during the past...
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...Business Economics GM545 Spring 2011 Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. By the end of the 6-week period of November 19th –December 31, gas prices in Chicago had risen significantly. In it’s bi-monthly newsletter at the beginning of January 2011, the Lundberg Survey, a report which tracks gas prices, points to Chicago for the highest gasoline prices nationally topping the charts at an average of $3.35 per gallon for regular. With Illinois already high, 58.8 cent gas tax coupled with the city of Chicago’s gas tax of 50 cent a gallon any nationwide increase in gas prices will be even more significant in Chicago (1). Gas prices vary widely from state to state based largely on local taxes placed on the inelastic product. But prices have been trending higher nationwide after an increase in the price of crude oil, the main ingredient in gasoline (2). In Chicago, just as in the rest of the U.S., there was an increase in demand for oil during the period of November 19th –December 31, 2010. This increase in demand is illustrated by the decrease in U.S. crude oil inventories. Between the mentioned period of 6 weeks, crude oil inventories declined by 21.84 million barrels (3). These declines were a result of increases in gas consumptions...
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...Patisy Salifu SAPAD133 Economics (ECF1110D) The Oil and Gas sector includes the oil and gas extraction industry as well as petroleum refining. The United States is the world's third-largest petroleum producer, with more than 500,000 producing wells and approximately 4,000 oil and natural gas platforms operating in U.S. waters. Together, oil and gas supply 65 percent of U.S. energy. The nation's 144 refineries process more than 17 million barrels of crude oil every day. Oil and gas production facilities include 16,000 establishments with a value of shipments of $134 billion. Natural gas is seen as a good source of electricity supply for a number of economic, operational and environmental reasons: it is low-risk (technically and financially); lower carbon relative to other fossil fuels; and gas plants can be built relatively quickly in around two years, unlike nuclear facilities, which can take much longer. (“Oil and Gas”, n.d.) Oil prices have risen while natural gas prices have soared. Using the supply and demand models, this essay analyzes the change in price from an economic point of view. The price of oil rose 1 percent Thursday as stockpiles declined and new indications that demand is rising in the U.S., the world's largest crude consumer. The price of natural gas soared nearly 5 percent to close at $4.46 per thousand cubic feet — the highest price since July of 2011 — after the government reported a huge draw in supplies...
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...persistent rise in prices and slow economic growth. Slow economic growth implies that there is a rise in unemployment as the economy is not working at its full potential. As part of their objectives, governments aim to lower unemployment and try to keep prices stable but when there is stagflation, conflicts tend to occur as policies intending to lower inflation can cause output to fall further. This essay will evaluate the causes of such an occurrence happening and what governments can do to resolve such problems, referring to current economic events. Governments are generally happy when there is a low level of inflation. A ‘creeping inflation’ can be connected with high profits and general business optimism. (Powell 2009:272) argues that this “maybe a necessary side-effect of expansionary policies to reduce unemployment.” Although when inflation rates are unanticipated and go out of control, the costs of inflation become more apparent. Rapid changes in prices lead to money-functions being non-existent and bartering starts to replace transactions. Normal economic behaviour is distorted too as household bring forward purchases if they expect inflation to increase further. As mentioned earlier unemployment is considered to be bad for an economy. This is shown in Graph 1 at point D where the economy is working within its Production Possibility Frontier (PPF). There is a waste of scarce resources which affects the growth potential of an economy. This is why governments try to implement...
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...2011 High Gasoline Prices Cause and Effect Hurricanes, wars and all sorts of chaos could lead to shortages in our oil supply. These shortages would bring expected higher prices. But what happens when other factors are at work? The laws of supply and demand indicate “Quantity demanded rises as price falls, other things constant”. Or alternatively: “Quantity demanded falls as price rises, other things constant” (Colander 84). For some, it is easy to blame the speculators and separate them from the laws of supply and demand. In reality, speculators only changed who purchased the future supply. They did not change the principle fact that there was a shortage, albeit an artificially created one, but still a shortage. Until 2000 US energy futures were traded only on regulated exchanges within the US and they were subject to great oversight by the CFTC in order to detect price fixing and fraud. Recently, there has been a very large growth in trading contracts that look like futures contracts and are structured exactly the same. The only difference, these contracts are traded on an unregulated market. This unregulated OTC electronic market was exempt from CFTC oversight by a provision inserted in the late hours of the 106th Congress. Enron and many other large traders lobbied congress for this passage. By buying large quantities of futures contracts and pushing the prices higher speculators have given oil companies the incentive to buy even more oil and put it into storage...
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...The oil, gas and petrochemicals industries are highly competitive. Within the oil and gas the competition is very strong. There are other countries that supply the fuel if there is a need for commerce, industry and the home. With the competitive industry so much pressure on the prices, affects oil products marketing and requires continuous management focus on reducing unit costs and improvements that are needed(Wikinvest, 2012). The implementation of group strategy requires continued technological advances and innovation including advances in exploration, production, refining, petrochemicals manufacturing technology and advances in technology related to energy usage (Wikinvest, 2012). At BP, the way that the company works could be the competitor’s worse enemy if they knew what technology BP uses. Oil, gas and product prices are a worldwide supply and demand. Just before oil price increases have resulted in increased cost inflation. Because of that, increased oil prices may not improve margin performance. In addition to the effect on revenues, margins and profitability from any fall in oil and natural gas prices, a long period of low prices. . If demand is elastic, it simply means that consumers will buy more oil when the price comes down. They will buy less when the price goes up. There are other reasons why consumers increase or decrease consumption, but price is the main driver of demand. Rapid material and change in oil, gas and product prices can impact strategic decisions...
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...experience for Americans since last fall. Regular gas is now less than $2 a gallon in many states, down from around $3.30 just a year ago. But how long will that last? It's just one of many questions stemming from the extraordinary drop in crude oil prices — a development that has boosted consumer confidence, hurt once-booming energy states and presented new opportunities — and challenges — for the U.S. and global economy. Q: Why did oil prices fall so much, so fast? A: A confluence of factors has contributed to the more than 50 percent slide in oil prices since September. The biggest is the steady rise in world petroleum supplies, mainly because of the shale-oil revolution in the U.S. Thanks to hydraulic fracturing, or fracking, and other drilling techniques, the U.S. has accounted for more than 80 percent of global crude production growth in the last five years. More recently, an increase in oil output in Iraq and Libya has further boosted capacity. At the same time, there are signs of softening demand. Economies in Europe and Japan have been stagnant, and the Chinese economy, the biggest driver of global oil demand, is slowing down. The strong dollar also has helped pushed down oil prices. Q: How long will it last? A: Low prices at the pump may be short-lived because the cost of crude is likely to start rebounding in the second half of this year. That's based on predictions of future supply and demand, including that low prices will stimulate greater use and therefore...
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...influenced all countries around the world, especially Canada. The price of oil has reached almost its lowest point since 2008 and Canadian Dollar has dropped below its lowest rate since 2003. In the past six months, the value of Canadian dollar has dropped by 70% against the US Dollar and the price of oil has declined by 15.6%. In this case, many people think that the Loonie depends on the price of oil only. However, they do not know that there are other reasons why the Canadian dollar goes up and down. People are considered the Canadian dollar as a petrocurrency. There is much evidence to support this statement. Since the oil price became extremely flexible and it has almost reached its lowest point, it has strongly impacted on currencies around the world, particularly on the Canadian Dollar. Since the government of Canada decide to implement a floating exchange rate, we see that as the price of oil goes up and down, the Canadian dollar behaves the same way. The reason why it is happening is that Canada exports 97% of its raw petroleum to other countries. A huge part of Canada’s earnings goes from crude oil sales and the main buyer of that resource is the United States. Canada makes almost 10 percent of its earnings from crude oil. Moreover, the countries, which buy the crude oil from Canada are used to work and pay with US dollars and it brings the huge impact on inflow of US dollar to Canadian economy. The fall in Lonnie has affected everything inside country, including businesses...
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