Gasoline - Supply, Demand, and Cost

Essay by jarretmiranCollege, UndergraduateA+, October 2005

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This paper will show the relationship between the supply, demand, and price changes as effected by recent events. Hurricane Katrina and the War in Iraq have left our gasoline infrastructure at such a point that it was almost crippled last week by Hurricane Katrina and the American economy is still feeling the effects of it. This paper will explain some of the reasons and effects behind this.

Gasoline - The Supply, Demand, and Cost.

"Supply and demand are the major driving force behind capitalism and the economy" (Hagenbough, 2005). Supply and demand allows consumers and producers to change the market condition quickly, but what happens when Mother Nature makes the changes for us? Last week Hurricane Katrina did just that; Hurricane Katrina dramatically impacted the Gulf of Mexico where several refineries were disrupted and several ports were closed that were dependant on oil importation. These hurricanes as well as several other storms this year have disrupted the supply of oil to the United States on several occasions (Webb, 2005).

If the oil companies that are dependant on this oil to make gasoline are unable to receive, refine, and distribute enough oil to their stations nationwide, the price of the gasoline must increase. This is what is referred to as supply and demand.

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 price of oil went up considerably when Hurricane Katrina hit the Gulf coast. 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 pumps (Strauss, 2005). This in turn...