Gasoline Supply, Demand and Price Changes

Essay by pinchetteUniversity, Bachelor'sA+, July 2006

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This paper will show the association between the supply, demand, and price changes as a result of recent and past events. Hurricane Katrina and the War in Iraq have left our gasoline infrastructure at such a point that it was almost crippled. Political threats, though not direct to the supply can send ripples though gas prices. The need for change in American gasoline consumption will also be discussed as shown during the 4th of July Holiday of 2006.

Gasoline Supply, Demand and Price Changes

Supply and demand allows consumers and producers to change the market condition quickly. Supply is influenced by the ability to receive, refine and distribute enough oil to stations nationwide. When there is a change in supply, the price of the gasoline must increase. Demand in turn is influenced by the price of goods. If the price of a product is high it is less likely for a consumer to purchase that product.

The Effects of Threats to Gasoline Prices

The price of oil went up this previous weekend after a series of missiles were test fired by North Korea on July 5. There may not have been a direct threat to oil production, "North Korea should have little bearing on oil prices, given that tensions in the region should not interrupt oil supply,'' said Gerard Burg, a minerals and energy analyst at National Australia Bank Ltd in Melbourne. Natural disasters such as Post-Hurricane Katrina can have a direct threat when the disaster causes destruction of the equipment necessary to manufacture the oil. By having the oil disruption in the Gulf area disrupted as well as the oil in the Iraq market, and with the demand for this oil not decreasing, the customers will ultimately have to pay the difference at the gas pumps. This...