America's Gasoline Problem

Page 1

Business Economics GM545

Fall 2009

Page 2

Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. Be sure to cite any references used.

Well there are various reasons why gas prices fluctuate. Many times bases of it are the idea of supply and demand, but other key factors play a major role in the fluctuation. According to http://online.wsj.com/article/SB125655760182307937.html in New Delhi, India a company by the name of Reliance Industries holds a 90% stake on the country’s case with a company in Canada owning the other 10%. The article is basically saying that, because of the company’s stronghold on the country’s gas that they have ultimate control of price and allocation of it. In many instances such as this the companies have the ability to name their prices. They can decide who gets the gas and for how much. Since it is such an important natural resource people have no choice, but to pay the prices in order to go about their daily lives. This structure of gas fluctuation can be very dangerous and detrimental to the country’s economy, but with the rich only getting richer do you think they really care. Along with the hierarchy process of gas fluctuations several other factors come into play. According to http://www.wsaw.com/unclassified/1685611.html, several factors play a key role in gas prices rising. The one factor that is common to all of us is the seasonality of gas prices. Most companies know exactly when people travel the most and raise prices accordingly. According to the article many companies raise their prices up to 5% during the summer months to take advantage of the consumers travel. Aside from the obvious seasonal markups wars, embargos and conflicts always have a huge affect on gas prices....