Gas
According to an article on CNNMoney.com, gas prices have rose steadily over the past three weeks and might continue to rise. The average price was $2.22 per gallon on February 9, 2007, nearly four cents higher since January. This rise is due to the rise in price of crude oils, a $7.90 increase. Unfortunately, the demand for gasoline during this winter has been low causing big marginal losses in the retail level. This is going to cause a big problem should prices continue to rise and demand does not pick back up. Also, as prices begin to rise, people are going to start to drive less. They will begin to drive only when necessary, or only fill up with the prices dip down. This will hurt the oil industry and only push the prices higher. If the demand for a product decreases, it is only natural for the price to rise. It's a never ending cycle. Do you think that we will find a stop to the money eating cycle? Or will gas prices continue to rise?
5 comments:
I believe that it depends on the amount of oil that is being drained. If the amount of oil that is being produced is lower than usual than the gas prices will rise because the oil company is trying to compensate for their losses. If there is less oil then there is less gas and the gas companies will be increasing the price of gas to compensate for their loses.
I believe that if the amount of oil that is produced stays constant, then the price of gas will stay constant. It is a never ending cycle because the price of gas is always changing, but I believe that is has more to do with how much oil the oil companies produce.
I think the gas prices are rediculous. It's not fair that we have to pay so much, especially students who can barely afford gas in the first place. I remember when gas was 97 cents!
Gas prices are a great example of how supply and demand work to determine prices.
Jessica, you are correct to point out that rising gas prices will provide incentives for drivers to economize on their driving habits. However, I'm not sure that high oil prices will "hurt" the oil industry. In fact, given that the demand for oil (and gasoline) is very price inelastic, high prices won't cause much of a drop in consumer purchases--consequently, consumers will actually end up spending more money on gasoline, much to the delight of the oil and gas companies.
Brian H, if the amount of oil produced stays constant, that is no guarantee that the price of oil will remain constant. You are forgetting that changes in demand will also have an impact on the market price of oil. With the continuing economic growth of countries like China and India, the world demand for oil will continue to rise for the forseeable future.
Rachel, fairness is not a concept that economists are very comfortable with. We would much rather focus on efficiency since we can more reasonable measure that. Besides, what's fair to consumers may not be fair to producers. How do you juggle overall fairness when a situation creates both winners and losers?
I agree that as the gas prices go up, more people will opt to drive less or downsize from their unnecessarily large SUVs to more environmentally friendly compact cars. I believe the solution is for both sides, the consumers and the producers, to make a big push towards energy alternatives. By combining resources and money, there is only time before an economically feasible alternative to conventional gas is produced-- making life easier for everyone and the environment.
I definitely believe gas prices are going to keep rising, because at the moment there are no alternatives. The demand for oil is extremely high, therefore gas companies are going to keep rising prices so they make more money. We do have other means of transportation, but I don't believe there are enough people who will stop driving because the cost of gasoline is too expensive.
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