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Everyones Gasoline Problem

In: Business and Management

Submitted By summerrae12
Words 335
Pages 2
Tracee Finley
Business Economics GM 545
Spring Semester 2012

Everyone’s Gasoline Problem Since September 2010, average monthly gas prices have risen 45 cents to $3.21 (February month-to-date), an increase of 16.4%. But during the past four years, there have been several periods where gas prices increased by even more substantial amounts. In 2008, gas prices rose 94 cents — or 33.4% — to $4.11 between February 2008 and June 2008. Gas prices also increased 63 cents from February to May 2006, 86 cents from February to May 2007, and 94 cents from December 2008 to June 2009. ( Prices fluctuate at the pump because of problems in the Middle East, natural disasters and government regulation. Crude oil also plays an important role in gas prices. Crude oil is a natural substance found underground that is used to produce fuel for cars, trucks, airplanes, boats and trains. As of February 2012, crude oil prices made up 72% of the price of gasoline. ( For every $1 increase in the price of a barrel of crude oil, U.S. consumers are likely to pay 2-1/2 more cents for a gallon of gasoline. The prices that we pay at the pump are determined by supply and demand. For example, if demand rises and supply falls, prices increase, and just the opposite when supply increases and demand decreases, prices will decrease. Being an inelastic product, few substitutes are available. The price does not have much effect on demand. Since people rely heavily on gasoline for their commutes, the quantity demanded did not change much. With our current economic conditions in this country, gas prices are expected to continue to fluctuate based upon global demand and high unemployment rates. Consumers have found alternative...

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