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. Moreover, this paper zooms in on how the impact of Hurricane Katrina brought about the dramatic increase in gasoline prices…
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The gasoline price has ostensibly undergone extensive fluctuations mainly because of the product nature and the industry which supplies the world with oil. Note that a bulk of the aggregate oil output is produced by the Organization of Petroleum Exporting Countries (OPEC). This influential group is organized as a cartel and composed of nations in the Middle East including United Arab Emirates, Saudi Arabia and Kuwait among others. The main produce of these countries is oil and other petroleum products. Other countries, including the United States, are largely dependent on these countries for their oil supply (Case & Fair, 2002). With their rich oil resources, these nations created the cartel which has the ability to control member countries’ oil production capacity and output quotas of enabled them to collude to raise the oil price by.
Given its mandate, supply of oil including gasoline is significantly affected by political unrest arising between these oil-exporting countries and other countries as well. To illustrate this point, supply of petroleum products was adversely affected by the war between Iran and Iraq in 1979. This tumultuous battle between two of the largest oil producers had caused a global oil supply shock and resulted in a dramatic increase in the price of oil. The limited oil supply then was further aggravated by the restricted means of transporting oil products to the rest of the world.
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Like many commodities being traded in the global market like gold, silver, rice, wheat etc. crude oil is also traded. The main reason for it being traded in the global market is that it’s one of those commodities which is unevenly distributed on the surface of earth.
a) Fig. 1: Demand and Supply curves 3. 4. 5. 6. 7. 8. 9. 10. 11. a) Demand and supply are equal at the points when equilibrium quantity is Q=200 units. It is also at this point when equilibrium price is also equal to P=200. This is as shown in the graph above.
Accordingly, the following analysis will present an argument for the way in which supply and demand is fundamentally shifted within the student beverage industry at the moment in time in which the risk of salmonella outbreak is noted. Whereas it may seem as counterintuitive that the risk of changes to supply and demand within something on the inelastic market may take place, it should not be understood that the food and beverage industry is inelastic.
The oil companies and other intermediaries participated with the embargo resulting to unheard levels of increase in world oil prices, reaching as high as four times the previous highs. Economies in industrialized countries in the world were greatly affected.
This research will begin with the statement that gasoline is one of the main sources of energy which fuels internal combustion engines. This energy resource is vital for the global economy as it fuels the various sectors of the industry by making possible the transportation of goods and services as well as providing heat.
power and its regulation (Holdich, & Chianelli, 2008). Equilibrium price is determined more or less by some of the same above factors in addition to the level of supply and the elasticity of supply. In other words the supply of gasoline is relatively inelastic.
For example, each additional ten cents per gallon adds as much as $14 billion to American gasoline expenses. In order to understand the importance of gasoline for the national economy, it is essential to look at the market and what factors are affecting the price of gasoline.
Assuming an initial equilibrium point E1 with 49 million barrels at $57.93 per barrel, the new equilibrium position E2 is now at 51 million barrels at $58.13 per barrel. The change in equilibrium price and quantity is brought about by the shift in the demand curve D1.
an increment in price (1%) shall force a decrement in quantity demanded (1%).Inelastic demand prevails when an increment by 1% in the unit’s prices causes a shift of less than 1% in the quantity’s demand (p>1% -
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