Gm545 Project Paper

Ali K Kaboglu

Business Economics GM545

JAN12 SEC P

K_kemal@hotmail.com

Exercise 1. /Question 1.

I’ve been in NJ since 2008 and I’ve seen when the gas price was $2 and when it was up to $4. There are very variable changes on gasoline prices recently in NJ and all around the US, even now it is still high according to the time I came here first. I was thinking this to happen according to the worldwide situations such as wars etc.

But after the research I’ve made I saw that there are a lot of factors that affects the gasoline prices as it can be seen below besides worldwide demands;

Factors that influence gasoline prices

Supply of crude oil – As it is known according to researches most of the crude oil which has refined into gasoline is produced and sold by OPEC. Based on this the cartel of 12 countries in Africa, the Middle East and South America use a loose quota system to determine how much oil to produce and sell. As we can see one of OPEC’s goals is to stabilize oil prices by eliminating unnecessary fluctuations. This causes a pricing and distribution change on price of international oil and the price of gasoline.

Distribution network – This is one of the most important thing on pricing the gasoline cost. Anything that interrupts the flow of petroleum through the distribution network can cause gas prices to rise, such as a natural disaster like Hurricane Irene.

Worldwide demand – Anything happens worldwide related to oil affects the gasoline price, some of them may affect directly some of them not. The demand for crude oil in China, India and other developing countries has risen with their population, increased trade, growing internal markets and strong commodity prices. In less than five years, it is estimated that developing nations will account for nearly half of the global demand for oil, up from 36 percent in 1996.

Value of the U.S. dollar – Oil is traded on the world market is U.S. dollars. When the value of the dollar declines in...