Essay on Cold Weather And Gas Price Flucatuation

Submitted By dandutro
Words: 873
Pages: 4

Danny Dutro
Professor Nicole Norton
Microeconomics 1B
23 October 2009

Gas Prices Above $3.00 in All 50 States

“Gas Prices Above $3.00 in All 50 States” is an article by Douglas A. McIntyre written on February 17th, 2014 (1). The article was posted on the 24/7 Wall Street website, which is a Delaware limited liability corporation that runs financial news content through the web (2). In his article McIntyre describes the trends in the economy that will contribute in making the future of oil and gasoline prices immensely high. This year is projected to be the largest consumption year for oil with our increasingly expanding economy, which sees great pressure towards an upward trend of prices with the colossal demand growth for oil. The author explains the forecast for this winter is expected to be unbearably cold in the Northern Hemisphere until February. This does not help the rising cost of oil because of the great demand for natural gas to combat the cold via heating usages. In turn, the relative inelastic demand and elastic supply combined with the cold, long winter contributes majorly to our current high gasoline prices.
The demand for gas is inelastic for many reasons. Firstly, for most people it is a necessity. Although there are substitutes (3) for using your gas tank even the most progressive of people tend to inevitably end up driving and using a fair amount of gas. I have biked to school, rode the bus, drove an electric car (which I no longer have), and even skated to school at one point. There are two major problems with this: one, most Americans are lazy and do not want to do something that involves exercise or physical exertion, they are stagnated by a culture of convenience. Second, people with highly structured days that need to get to point A to point B to point C require access to a car because not all buses will cater to their specific needs, especially if they are traveling to someplace out of the city for a job after school and need to be prompt and on time. This does not include basic aspects of geography which require most Americans to own or have access to a vehicle in order to economically survive. These factors make gasoline a necessity for many individuals, and they become accustomed to allocating a small chunk out of every paycheck to their gasoline tank.
As demand for a commodity increases, the price will inevitably increase as well. There are numerous factors which affect the prices of gasoline with a major factor being climate. The cold affects the process of drilling, extracting, and refining crude oil products. Also, logistically gas cannot be delivered as quickly in cold climates. Cold weather offers barriers for drivers in the form of snowstorms and blizzards and in some cases prevents them from getting their product from place to place. This increases transportation costs and decreases timing for the end user of the product (4). Dangerous cold conditions also cause the need for more weather-ready equipment and manpower at drill sites. The vast quantity of snow delays the movement of drilling equipment as large trucks find it an impossibility to pass through the icy and snow-covered roads.
Consequentially, the entire supply chain is affected. The gasoline trucks are not able to reach their destinations on time, gas stations then must react to this delay by raising prices due to their lack of supply, leaving the consumer at the mercy of all these factors. Due to the relative inelasticities in the demand (5) for oil products,