Supply & Demand Article

Essay by alayiah0912University, Bachelor'sA+, November 2006

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Supply and demand is defined as, how prices vary because of a balance between product availability at each price (supply), and the desires of those with purchasing power at each price (demand). Do not confuse the two elements just because there is an increase in supply does not mean that there is an actually demand for a product.

The article on Gasoline Supply and Demand, Reuters, August 28, 2006 discusses the current price increase along with supply and demand of gasoline in the United States. Gasoline/oil is one product which is in high demand, and based on the United States inabilty to produce/refine gasoline within the Untied States the populations demand must be sourced from those countries which have ample supply. U.S. gasoline prices in June averaged $2.93 per U.S. gallon, compared with just over $2.33 per gallon in June 2005, according to the EIA (U.S. Energy Information Administration). As recently as 2004, the average price of gasoline in June was only $2.01 per gallon.

Product Demand:

Gasoline demand have not decreased in the United States for 23 years but high prices in 2005 and 2006 have deflated the rate of increase from levels between 1.5 and 2 percent seen earlier. Jason Schenker, an economist with Wachovia Bank in Charleston, North Carolina stated, "Year-over-year demand is still up and that is something we have seen fairly consistently." Furthermore, gasoline demand in June of 2006 grew by just over 0.6 percent year-on-year, less than half the rate previously implied by weekly data and in August 2006 gasoline consumption averaged nearly 400 million gallons a day. The United States government's monthly oil data showed that the U.S. gasoline demand rose by 60,000 barrels per day to 9.44 million bpd (barrels per day) in June or up 0.64 percent from June...