Everyone's Gasoline Problem

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Business Economics GM545

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Exercise 1: Everyone’s Gasoline Problem

The Gasoline/Petroleum market is a good example of supply and demand. Gas prices are based on basic supply and demand, when the demand goes up and the supply goes down, prices go up very quickly; and just the opposite when supply increases and demand decreases, prices decrease.

There are many reasons as to why the gas prices fluctuate. Some of the reasons are industry factors such as the economy, prices per barrel of oil. Gas wholesalers, can have an impact on the market such as charging higher premiums for service and handling of the product. Seasonal demand can also affect the price of gasoline. Gas prices are usually at a high during late spring and throughout the summer months. During these two seasons people are out driving more. They go on many vacations or they just are out and about enjoying the good weather. Once the winter months arrive gasoline prices usually go down because there aren’t many people out and about and people usually only drive to work and back home and they limit their outdoor activities. Some other factors that influence the price of gas are Government Regulations and taxation. National, state, regional and local government each has levied a tax on gas. These gasoline prices include these taxes per gallon and each community varies. Many states and cities that have higher taxes often their gas prices are much higher than others. (API 2010)

When I looked at the prices of gasoline in my area, Northwest Indiana and comparing Indiana to the rest of the country, the average cost per gallon in the Northwest

Indiana is 3.471 and is falling. The national average price per gallon is $3.374 (Gas Buddy Organization, Inc 2012). After, looking at three gas stations nearest my home which are Speedway ($3.459), Shell ($3.699) and Meijer’s ($3.479), the Shell and Meijer gas stations are located near the highway and the shopping...