StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Cause and Effect on Gasoline Prices - Essay Example

Cite this document
Summary
This essay analyses the price of gasoline gases has remained a major issue all over the world. This reason for this is because the price of gases has been fluctuating for a long time creating a lot of instability in the market. The major causes of this fluctuation include a price of crude oil…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER94.1% of users find it useful
Cause and Effect on Gasoline Prices
Read Text Preview

Extract of sample "Cause and Effect on Gasoline Prices"

Download file to see previous pages

 The price of crude oil and how its effect is felt at the pumps is an issue of interest in as far as the price of gasoline gases is concerned. Gasoline is produced from crude oil through distillation process whereby crude oil is heated and fumes captured are converted to various products including gasoline. Thus the cost of extracting crude oil as well as the cost of processing it to produce gasoline will definitely affect the price of its products. For instance, the price of crude constitutes up to half or more of the price of gasoline gallon as suggested by Gupta and Demirbas (73).

The rise in the price of crude oil has been driven by the increasing demand for oil globally and the political instability in most of the oil-producing countries according to Gallun (723). Therefore these factors end up directly affecting the price of gasoline. The depreciation of the US dollar when compared to other currencies of other countries contributes to the changes of gasoline gas price. This can be attributed to the fact that when the US dollar changes its value, there is a shift in the demand and costs of countries with different currencies.

For instance the dollars depreciation against the Euro by half, the Countries using the Euro pay half more in dollars thus increases the demand. If the Us dollar depreciates, investors in return have to shift their capital there is the rise in price of crude oil gases hence affecting price of Gasoline gas according to Obadia (23). The world wide demand and supply for crude oil affects the price of gasoline gases in different ways. This is because demand and supply of crude oil is influenced by the organization of Petroleum Exporting countries it sets price of oil products produced by its members.

This organization also holds the biggest percentage of oil supply in the world and thus it dictates the terms of supply of oil products as suggested by Boyes and Melvin (11). In terms of demand, during the summer there tends be to a lot of gasoline gas demand hence if demand exceeds supply the prices bare likely to rise. It is therefore true that imbalance in supply and demand leads to fluctuation in the price of gasoline gases according to International Monetary Fund (56). For instance if there is fast rise in demand or quick fall in supply due factors such as refinery there may occur a rapid depletion for gasoline gases.

The future of oil manufacturing and the contracts made on the future date and price for selling oil in a way affect the price of gasoline gases. On one hand with increasing technology, the future may experience increased demand for gasoline gas compared to the source of this gas and thus prices may end up increasing. On the other hand the increasing alternatives of sources of energy replacing the use of gasoline in future are likely to lead to a decrease in price of the gasoline gases. The future increase in retail gas stations which will still share the market with the existing ones will lead to lower prices in order to attract customers.

Some contracts have been established to decide on the future date and price for selling oil products. For instance a Collar contract is a mini-max strategy assuring producers of oil either a minimum or maximum range of prices for the sale of oil in the future as suggested by Gallup and Frank (221).  

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Cause and Effect on Gasoline Prices Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1415555-cause-and-effect-essay-on-gasoline-prices
(Cause and Effect on Gasoline Prices Essay Example | Topics and Well Written Essays - 750 Words)
https://studentshare.org/macro-microeconomics/1415555-cause-and-effect-essay-on-gasoline-prices.
“Cause and Effect on Gasoline Prices Essay Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.org/macro-microeconomics/1415555-cause-and-effect-essay-on-gasoline-prices.
  • Cited: 0 times

CHECK THESE SAMPLES OF Cause and Effect on Gasoline Prices

Gas Prices Fluctuations

(How Gas Prices Work) It is to be stressed that the industrialized world survives basically on gasoline which is the blood line fluid in determining the economy of a country.... This effect has been proved for the year 1999-2000 where the oil price shock had a negligible effect on the economy when compared to the recent past.... So when this jerk disrupts, as in the past, it will have a considerable effect on Gross Domestic Product -- GDP, employment and inflation....
5 Pages (1250 words) Essay

Oil Price Shock: Cause and Effect

An essay "Oil Price Shock: cause and effect" outlines that the rate of increase and the historic highs cannot be explained in strict terms of market economics.... Worldwide inflationary pressures push prices higher around the globe.... The necessity of oil drives prices at the margins and the resulting shock pushes consumers and industry to scale back use, limit the demand, and create alternatives for petroleum products.... While the news and fear mongers warn of a worldwide oil shortage and a bottleneck in refinery capacity, this alone cannot explain the sharp increase in prices....
5 Pages (1250 words) Essay

Systematic Monetary Policy and the Effects of Oil Price Shocks

[1] First, this partially reflects the lower oil intensities of consumption and production, which lessen both the direct effect on inflation and the medium- and long-term effects on GDP.... In this research paper “Systematic Monetary Policy and the Effects of Oil Price Shocks” the author will look at the major effects that increases in oil prices have on the global economy.... In the paper, he will first look at the theory provided by the IMF… The author states that in the recent months, oil prices are certainly below their August 2006 peaks....
8 Pages (2000 words) Assignment

Gasoline Prices Research Paper

In the gasoline market this is seen during the summer months, when families plan vacations and the demand for fuel rises (gasoline prices).... It is again seen in the winter as the demand for home heating fuel creates anther increase in price (gasoline prices).... In the gasoline market this is seen during the summer months, when families plan vacations and the demand for fuel rises (gasoline prices).... It is again seen in the winter as the demand for home heating fuel creates anther increase in price (gasoline prices)....
2 Pages (500 words) Research Paper

Supply and Demand of Gasoline

Moreover, this paper zooms in on how the impact of Hurricane Katrina brought about the dramatic increase in gasoline prices.... This paper discusses the condition of supply and demand of gasoline in the world market and how the interaction between these fundamental economic principles affects the price level for this petroleum product.... hellip; gasoline is one of the main sources of energy which fuels internal combustion engines.... The gasoline price has ostensibly undergone extensive fluctuations mainly because of the product nature and the industry which supplies the world with oil....
5 Pages (1250 words) Essay

Gasoline Crises Based on the Oil Price Variations

Any fluctuations in oil supply and its prices can create immense changes in world economy especially in the current era of globalization and liberalization.... Variations in oil prices can affect Gross Domestic Product (GDP) growth, unemployment, inflation and also the oil… Oil is also required for the production of electric power which is the most important component of every industry.... Major oil producing countries have monopolized the world market and they have varied the prices of oil as per the supply and demand theory....
7 Pages (1750 words) Research Paper

The relationship between crude oil prices and gasoline prices

In the same way, when gasoline prices go up, the production cost of products also shoots (Averdunk, 2010).... It is important to identify the relationship between crude oil price and gasoline prices in the market.... Research indicates that a 15% tumble of crude oil prices leads to 5% drop of the gasoline prices (Swag, 2004).... All the oil companies would present the same gasoline prices in the market.... The difference in gasoline prices in the market would result in other cost such as overhead cost....
5 Pages (1250 words) Essay

Price Elasticity of Gasoline in the United States

If this is so, should profit maximizing gasoline stations raise their prices?... If the price of the gasoline rises the profit maximizing gasoline companies will not be able to raise the prices according to their wish as in such cases the consumers will shift to the more fuel efficient vehicles which will ultimately lead to a fall in demand conditions for gasoline1.... Suppose a certain organization reduces the price of one of its… The demand curve of gasoline is said to be elastic....
1 Pages (250 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us