Premium Essay

The Impact of Increasing Gas Prices

In: Social Issues

Submitted By simonem
Words 561
Pages 3
The volatile global gas market presents a myriad of challenges to both small and large businesses that have to be strategic and flexible in adapting to the constant changes, communicating these changes to their customers while trying to grow their business and its profit margin.

According to Robert McNally, President of the Rapidan Group LLC in Bethesda, MD, “historically, small businesses are considered the source of job creation, but with the instability in oil prices they have found it difficult to run their businesses, hire more employees and plan for the future. Rising oil prices hurt them directly by increasing input costs, such as fuel, and reducing the purchasing power of their customers. Higher fuel prices feed into higher prices of many goods and services, including food and transportation. These wholesale cost increases get passed along to small businesses, who must then contend with difficult choices as to whether to absorb or pass them along.”

As stated by Wikipedia “adapting to change is crucial in business and particularly small business; not being tied to any bureaucratic inertia, it is typically easier to respond to the marketplace quickly.” While multinational companies have the benefits of economies of scale, sufficient integration and cash flow smaller companies tend to be more agile in reacting and adapting more readily to change.

Multinationals are able to absorb costs for longer periods or may have the market share and pricing power to raise the price of the product to offset the increased cost of fuel. However, small businesses have to adapt faster than multinationals because their margins get eroded much faster, which can run them out of business quickly. Additionally, small businesses run the risk of losing their customers much faster than a multinational and so have to share in the absorption of the cost of rising fuel or find

Similar Documents

Premium Essay

Gm545

...Everyone’s Gasoline Problem. Why does this happen? Gasoline prices have been on the minds of almost everyone lately. Many times people dread having to go to the pump or wait until it is absolutely necessary to full up their gas tanks. Some have even changed the type of vehicle they drive in an attempt to help save them money at the pump. It would seem that gas prices are either always increasing or decreasing on a weekly and even sometimes daily basis Gas prices are affected by numerous factors including the demand and supply for gasoline on the market, the prices of crude oil on the world market, seasonal changes and local market competition just to name a few. In recent years, the world's appetite for gasoline and diesel fuel grew so quickly that suppliers of these fuels had a difficult time keeping up with demand. The demand for gasoline has changed over the years as more and more people globally have access to vehicular transportation. Countries such as China and India, each with a population in excess of 1 billion, are experiencing an expanding middle class that will likely use more gasoline over time1. Although the demand for gasoline has dramatically increased, its supply sources are still the same and are depleting. The quality of the oil is not the same in all locations, hence the higher quality oil cost a lot more. These costs then trickle down to the consumer. Crude oil prices are significantly influenced by the Oil Producing and Exporting Countries...

Words: 398 - Pages: 2

Premium Essay

Current Gas Prices

...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...

Words: 400 - Pages: 2

Premium Essay

The Exportation of U.S. Lng

...estimates of oil and gas in the lower 48 states. This sustained supply and production has been a result of technological advancement, particularly improved techniques in hydraulic fracturing, has kept prices for natural gas extremely low while crude oil prices have fluctuated and changed over time. One reason for this is the different nature of exportation in the two hydrocarbons. As will be discussed below, the transportation and exporting of natural gas is much different than for crude oil. Natural gas must undergo a liquefaction process in order to travel by specialized cargo ship, the alternative to a pipeline, which adds substantial costs to the activity. There are currently no operational natural gas export terminals in the lower 48 states, but a few are under construction. The large sunk costs will be a large part of our consideration of the exportation of natural gas. The U.S. has traditionally been a net importer of gas, and considering the high upfront costs of building export terminals, the sale of American gas has been isolated almost exclusively to the domestic market. The only exception to this has been to export natural gas only where existing pipelines can carry it, which has limited foreign export to North America. Despite this historical trend, calls for the US to begin exporting natural gas have been growing louder as the potential to seek higher priced natural gas markets become more attractive. This paper will explore liquid natural gas (LNG) export terminals...

Words: 6784 - Pages: 28

Free Essay

Russia

...the EU region; indeed, it was reported that the total number of foreign-born individuals who had entered Russia had risen to 14.5 million as of the end of 2008. Immigration laws play a vital role in attracting foreign direct investment (FDI) and, in Russia's case, they are presently adding to its strengths. * GDP Contribution by sector: Agriculture | 4.2% | Industry | 33.8% | Services | 62.0% | Russia has maintained a surplus position since 2000. Improved competitiveness and higher oil prices facilitated a dramatic turnaround in terms of current account, from a deficit of around 0.5% of GDP in 1998 to a surplus of 12% of GDP in 1999. This surplus increased further during 2000 to 18% of GDP. This marked improvement in fortunes facilitated the stabilization of the ruble in international markets. Although export growth remained strong, a bounce back in import demand eroded the current account surplus to 8.5% of GDP in 2002 and 8.2% in 2003. However, increasing oil prices (which rose to more than $30 per barrel for Russian oil) in 2004 saw the current account surplus widen to more than 10% of GDP. Accelerated...

Words: 1371 - Pages: 6

Premium Essay

Investment Thesis

...Macroeconomics ​ ​ A wide range of understanding about the macro-environment helps a company to maximize its position amongst the influences of the global economy. Economic, political, legal, technological, socio-cultural, international demand, supply impacts, and demographic trends are all factors that influence the macro-environment. The macro-environment is always changing, so the success of the business rides on their ability to adapt to these changes and forecast the macro economy better than their competitors (Bodie). Being proactive and making a sound macro-environmental analysis can be a means of gaining a competitive advantage, or at least not being concerned by a competitive disadvantage. In completing a top-down analysis we start with the global economy (Bodie). Technological factors play in to the macro-environment by means of new inventions and development, materials development, innovative manufacturing, distribution and logistics. This also includes changes in the way that information is sent and received. This can be closely related to the environmental impacts that happen within an economy, such as depleting natural resources (Sieminski). The variations of different countries economic performance and within their regions are considerable (Bodie). What happens in other countries’ economies will influence the U.S. economy and its markets in either a negative or positive way depending on the economic circumstance. What is originally forecasted for the...

Words: 6588 - Pages: 27

Premium Essay

Macroeconomics

...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...

Words: 621 - Pages: 3

Premium Essay

Market Analysis

...experienced teachers of the department. So, I am very grateful to the teachers of the Marketing Department. A special mention of appreciation must go to my supervisor and teacher Dr. Dipongkor Roy, Professor for his sincere guidance and cordial assistance. His heartfelt help, experienced guidance and cordial inspiration will remain in my mind forever. I am also grateful to Dr. Narayon Bhowmick, Chairman, Department of Marketing, for their help. Finally, I would like to thank the students of Marketing Department for their cooperation. Sincerely, (Krantic Chandra) 1.1 INTRODUCTION Now a days, flat means own home, personal abode, as well as safe shelter. Because the residential facilities of our country is not increasing proportionately to the growth of population. For this reason, the scarcity of dwelling place becomes acute day by day. It has become, especially in Dhaka almost impossible to get abode. On the other hand, the person who has place is not willing to entangle himself with the hazard of building house. Thus housing has spread to a great extends at almost every...

Words: 6048 - Pages: 25

Premium Essay

The Shale Gas Revolution in the U.S.

...The Shale Gas Revolution in the U.S. - Aspect of Domestic Market - Prepared for Microeconomics May 6, 2014 "The all-of-the-above energy strategy I announced a few years ago is working, and today, America is closer to energy independence than we’ve been in decades," Obama said during his fifth State of the Union speech on January 2014. In a fact sheet accompanying the speech, the White House called on Congress to establish "sustainable shale gas growth zones." As mentioned by the U.S. president Obama, “The Shale Gas Revolution” is hot topic in the energy industry recently. Previously, the U.S. has imported large amounts of natural gas from other countries, but now it is expected to be an exporter of natural gas because of shale gas production. (Reference: Annual Energy Outlook 2011, May, 2011) Exporting shale gas would bring economic benefits. Gross Domestic Product can be increased, employment on LNG supply chain would be increased, and there will be no import of LNG anymore. Nevertheless, there is some limitation which will not favor to domestic LNG market. For exporting the shale gas, there are many researches to determine the associated costs. The price U.S. LNG exporters can afford to charge can be separated into the following components. Price = Wellhead price + Pipeline + Liquefaction + Shipping + Regasification Based on the above formula, experts’ estimate that the minimum price the U.S. and afford to export LNG to Asia, mainly Japan and Korea...

Words: 453 - Pages: 2

Premium Essay

Gm591

...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 outlined in our book. Be sure to cite any references used. Fluctuating gas prices are caused by a number of factors. The combination of 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. Crude oil prices are determined by worldwide supply and demand, with significant influence by the Oil Producing and Exporting Countries (OPEC) as they determine how much oil to produce and sell to other countries. The more crude oil OPEC chooses to produce and release, the lower the price. With an increase in worldwide demand for oil, including unexpected demand growth in China, India, and other fast developing nations. These nations have experienced a tremendous growth in the number of citizens who have access to automobiles, and their billion-person populations have a strong impact on the amount of crude oil needed in those parts of the world. Seasonal changes can have a serious impact on gas prices as well. Gas prices increase greatly during the summer and holiday seasons because American’s travel increases during these times. For example, the American gas demand increases by 5% in the summer season, resulting in higher gas prices during these times...

Words: 1160 - Pages: 5

Premium Essay

Opec Oil: Economic Events and the Impacts

...OPEC OIL IN 2010: ECONOMIC EVENTS, TRENDS IN DEMAND AND SUPPLY AND IMPACT ON PRICES Etuwat James J.O., American University of Leadership, 2012 1.0 INTRODUCTION This submission is on an organization known by its acronym OPEC but its full name is Organization of the Petroleum Exporting Countries. The write up seeks to identify economic events related to 2010 that have influenced the trends of the supply and demand of OPEC oil and the impact of these events on oil prices. My focus will be on the period of 2010 and to an extent prior to that year. According to their website (OPEC 2012) , the Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental Organization and was created in the Iraq capital of Baghdad after endorsement of accord in 1960 by the founding members, Kuwait, Iraq, Saudi Arabia, Islamic Republic of Iran and Venezuela. Others came in later in alphabetical order: Algeria (1969), Angola (2007), Ecuador (1973), Gabon (1975), Indonesia (1962), Libya (1962), Nigeria (1971), Qatar (1961), United Arab Emirates (1967). However, Ecuador deferred its membership in the period December 1992 to October 2007, Gabon ceased its attachment in 1995. Indonesia shelved its commitment from January 2009. At the moment, OPEC has Member Nations. OPEC had its head office in Geneva, Switzerland, for five years since its creation but transferred Vienna, Austria in 1965. The governing charter of OPEC differentiates between the Founder Members and Full Members...

Words: 3328 - Pages: 14

Premium Essay

Oil And Gas Industry In Malaysia

...significant oil and gas producers. Malaysia holds the world’s 28th largest crude oil reserves with proven oil reserves of 4 billion barrels. Malaysia is also the world’s 13th largest natural gas reserves with a 33 capacity of 2400 billion cubic meters. Regarding to this, the development of oil and gas industry in Malaysia bring some impact to us. Mining in the past few decades in the oil,it brings some effects on economic, social and environment to some developing countries led to a huge problem. As one of the nation's main commodities, oil and gas has a very strong impact on the Malaysian economy. Our Oil and Gas team with its industry professionals and worldwide capabilities is ideally placed to help companies...

Words: 1132 - Pages: 5

Premium Essay

Core Economics

...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...

Words: 596 - Pages: 3

Premium Essay

Economic Analysis of Shale Gas

...Economic Analysis of Shale Gas an Industry Alternative By Lillian Ashford & Bridget M. Chow Professor Nelson Altamirano, Ph.D. National University ECO 607 Economics for Managerial Decision-Making December 11, 2011 Introduction Shale gas is natural gas that is trapped in shale formations. Shale particles are fine grained sedimentary rocks that are rich sources of petroleum and natural gas. In the past, it was not economically viable to produce shale gas; however, with technological advances and the forward thinking perceptions of reducing our ecological footprint, the process has become more economical due to horizontal drilling and fracturing. The natural gas industry in the United States has been revitalized as a result of the production of natural gas from shale formations. In 2009, shale gas represented approximately 14% of the United States total natural gas supply. The production of shale gas is expected to increase and make up approximately 60% of the (U.S.) total natural gas supply by 2035. The question to ponder is whether or not shale gas is a viable energy option for the United States to consider in reducing the energy dependence of the Organization of Petroleum Exporting Countries (OPEC) while increasing fiscal responsibility and economic viability in both the short and long run analysis? Economic Analysis The shale gas industry has contributed to the economy in terms of jobs, economic value...

Words: 1290 - Pages: 6

Premium Essay

Kingsford Analysis

...a marketing plan to evaluate and adjust the matter at hand. First we will begin with identifying the issues and implementing a method to reemphasize the importance of marketing in the business. The goal is to create a marketing plan that will add value to Kingsford’s market share, sales, and profitability. It is evident that Kingsford is a superior product to its competitors such as Royal Oak, but the company faces losing market share to gas grilling because it is a more convenient alternative to cooking. Since Kingsford has already been an established brand, it can effectively market its brand awareness with an increase in media advertising which is a probable reason why the company did not reach its highest potential. The company needs to correspond to the increasing use of outdoor grilling in the USA which is now a great opportunity for the company to start a marketing strategy and establishing a greater brand recognition. The biggest challenge will be how well the company can gear people’s interest towards charcoal grilling away from gas grilling yet at the same time capture more market share from Royal Oak as well. Throughout this report we will go over the other possible issues that may be most effective in building a stronger marketing plan to improve Kingsford as a whole against its major competitors. Problem Statement and Statement of Alternatives It is a given that Kingsford Charcoal is struggling to improve its sales and profits to ensure future growth of the company...

Words: 1514 - Pages: 7

Premium Essay

Gas Prices in California

...Why Gas Prices are higher in California than in other Parts of US English 123 James L Hicks Embry Riddle Aeronautical University Abstract The rising gasoline and oil prices have become a global concern since petroleum has many uses around the world and yet its prices have continued rising for the last sixty years. This paper sought to find out why gas prices are higher in California than in other parts of America. The literature reviewed showed that West gasoline market dominated by California is defined by tight balance between supply and demand. Other factors found to be contributing the escalating gas price in California include isolation of the state from other refining centers, market conditions including international demand, Wall Street speculation, poor policies leading to uncontrolled oil cartels, decline of oil production during technical failure, political interferences, and increasing prices of crude oil due to demand forces. Despite there being no quick solution to the challenge, temporary measures such as efficient use of the available resource while looking for alternative cheaper source of energy could alleviate the challenge. Why Gas Prices are Higher in California than in Other Parts of US The Rising gasoline and oil prices have today become a world concern (Garrington, 2012). More concerns are raised considering that petroleum is an important product whose price continues escalating for the last sixty...

Words: 2919 - Pages: 12