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Supply and Demand of Gasoline - Essay Example

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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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Supply and Demand of Gasoline
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Download file to see previous pages 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. ...Download file to see next pagesRead More
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