The relationship between crude oil prices and gasoline prices - Essay Example

The gas prices in the market influence the way people budget, travel, or the shipping of products into the market. When the prices of this essential product go up, people have to decide what products to buy in the market and what products to forgo. The production cost often influences prices in the market. In the same way, when gasoline prices go up, the production cost of products also shoots (Averdunk, 2010). The factor that influences the above price fluctuation is crude oil prices. Crude oil prices have an influence upon individual spending.

An individual has to make a difficult decision in order to scrap what is less important when prices shoot. The effects of the crude oil prices often influence the operation of many companies because these companies depend on products derived from crude oil. It is important to identify the relationship between crude oil price and gasoline prices in the market. Market prices of products derived from crude oil often feel the impact of change in crude oil price. Research indicates that a 15% tumble of crude oil prices leads to 5% drop of the gasoline prices (Swag, 2004).

Notably, the gasoline firms would present the same pump prices for the gasoline products. All the oil companies would present the same gasoline prices in the market. This research further indicates that many motorcar owners would face the same influence whenever the crude oil prices go up. Crude oil prices seem to be equal throughout the producing countries. The research also noted that crude oil prices are universal. Thus, the effect of crude oil prices in the market would influence the operation of many activities in different countries.

The difference in gasoline prices in the market would result in other cost such as overhead cost. Overhead cost influences the profit that a company would make, thus influencing prices of products of the company. On the other hand, competition that exists among the gasoline companies would influence how the prices of