Project 1 Essay

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Project 1

Gasoline prices have been known to fluctuate from time to time. There are several causes for this. One of the reasons that I can think of would be the increase in price of crude oil. When the crude oil prices increase, the price is passed on to the wholesalers, who in-turn, passes on the cost on to consumers. Crude oil prices are determined by supply and demand with a great deal of influence coming from the Oil Producing and Exporting Countries (OPEC) as they decide on how much oil to produce and sell to other countries. OPEC consists of thirteen countries which make up 40 percent of the world’s oil production and they hold a major part of the world’s oil reserve. “When OPEC wants to raise the price of crude oil, they simply reduce production. This causes the prices of gasoline to jump because of the short supply, but also because of the possibility of future reductions.” (Bonsor and Grabianowski, 2001)
Supply and demand also plays a major part in gasoline prices fluctuating. As stated in Chapter 3 of the text, supply is “ The maximum amount of a product that sellers are willing and able to provide for sale over some time period at various prices, holding all other relevant factors contact (the ceteris paribus condition).” (Stone, 2008 p. 60). Demand is “ the maximum amount of a product that buyers are willing and able to purchase over some time period at various prices, holding all other relevant factors constant (the ceteris paribus condition).” (Stone, 2008 p. 53) The law of supply states that as prices rise, the quantity of supplied rises, as price falls the quantity supplied falls.
According to "U.S. gas prices rise 6 cents; first time since October-survey - Yahoo! News Maktoob", 2012, The average price for a gallon of regular gasoline in the United States rose in the last three weeks for the first time since early October, as U.S. refineries passed on the cost of higher crude oil prices, according to a widely followed survey released on Sunday. Gasoline prices averaged $3.3247 per gallon on Jan. 6, up 6.68 cents from Dec. 21, said Trilby Lundberg, editor of the Lundberg Survey. Prices had declined for the prior 11 weeks, falling 57.96 cents since touching near $3.84 on Oct. 5. "This rise is a partial pass-through of higher crude oil prices that U.S. refiners are paying," Lundberg said, noting that more price increases may be coming. "U.S. refiners will need to attempt to complete the pass-through of their higher crude oil costs to marketers and retailers that they supply. That's the main reason we can expect a few more cents at the pump over the next several days, assuming there is no huge change in the price of crude," she said.
After a year of abnormally high and even record breaking gas prices, Chicago drivers have seen a reprieve the past four months. Since the beginning of September, local gas prices on average have fallen around 90 cents a gallon for regular unleaded gasoline.
According to AAA’s Fuel Gauge Report, prices have plummeted from $4.48 per gallon to $3.57 per gallon, while ChicagoGasPrices.com has gas declining from $4.37 per gallon in early September to $3.46 a gallon Monday.
In December, fuel prices dropped around 20 cents a gallon, according to both AAA and ChicagoGasPrices.com, making area gas prices around 17 cents lower a gallon than prices a year ago. Nationally, fuel prices are an average 30 cents per gallon lower than this time last year. "The reason for the downward trend that started a few months ago is a combination of decreased demand, increased supplies and the switchover to less expensive winter-blend fuels." said AAA Chicago spokesperson Nick Jarmusz. "It was aided last month by the economic uncertainty resulting from the 'fiscal cliff' debate in Washington."
Hyde Park resident Patrick DeHaan, petroleum analyst for GasBuddy.com, a website which tracks gas prices across the U.S. has a similar explanation for the lower prices to Jarmusz but is
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