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Essay / Research Paper Abstract
A 5 page paper discussing the effect of the law of supply and demand on gas prices, as well as price elasticities. Gas is a rather inelastic product in that it is seen as a necessity and to date there are no ready substitutes for it, so it is not as directly affected by the effects of supply, demand and price. World oil prices continue to increase as China continues to industrialize; refinery problems in the US in 2007 further contribute to increasing prices at the pump. Includes 2 charts. Bibliography lists 4 sources.
Page Count:
5 pages (~225 words per page)
File: CC6_KSeconGasPr2.rtf
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Unformatted sample text from the term paper:
The consumers view is that gas prices increase much more quickly than they decline, and that they never quite return to levels we came to view as "normal" after an
intense price spike such as that which followed Hurricanes Katrina and Rita in 2005. Demand for world oil supplies - and therefore resulting price pressures - increases as China
continues to industrialize. China is expected to surpass the United States in greenhouse gas emissions by November 2007 (Vidal, 2007). Coal burning is responsible for much of that
increase, but oil contributes an increasing share. "China could overtake US as biggest emissions culprit by November" At the same time that demand
is increasing for a commodity that is available in limited supply, within the US currently we are experiencing the combination of increased demand and reduced supply. US drivers are
driving more and longer distances, and we historically take to the roads during the summer vacation season. At the same time, many of Americas refineries are operating at reduced
capacity or are not operating at all as they are refurbished or undergo routine maintenance. The result is that less gasoline is being delivered to retailers; drivers are demanding
more of it; and the price is increasing. The law of supply and demand holds that as supply increases, price decreases (Sosin, n.d.).
This in turn should increase demand for the product, which eventually will strain the supply side to increase prices again. The ultimate effect is to establish and maintain
price, supply and demand equilibrium within a range of tolerance of each. There are at least two caveats that apply to operation of supply and demand, however. One
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