How low will gas go? Since the 19th century, gas has gradually become a necessity to mankind. It has been used for lighting our houses, to produce heat, to cook our food and to run our vehicles. As time passed, the price of gas has known many changes in Montreal. By the year of 2008 the price was relatively low, but suddenly became very high in 2014. This year in Montreal, the prices are as low as 3.4 US $/G. When considering the previously mentioned facts, we ask ourselves why the price of gas is low and what are the factors fluctuating its price. The main factor responsible of gas price changes is the cost of oil. According to the Business Insider website, two-thirds of the cost of gas is determined by the oil cost and the rest constitutes According to the website of Oil-Price, today’s value for a barrel can be bought at the price of $41.25 this means that oil is not demanded as much as it used to be over the years, because of the awareness of the environment and also because it is a cyclical phenomenon, there’s no actual reason, but the price will eventually rise again. Since oil is used to produce gas, it would come with surprise if the price of gas is low since the oil cost are also low. Gas prices depend on oil costs and oil costs depend on Why is the cost low? For the Canadian citizens it is a good thing because low cost of oil equals low price for gas, therefore the people of this country will have extra money in their pockets: “typical consumers will be saving an average of $25 a week, or $300 in three months” says Elna Cain in her article titled Why Are Gas Prices Low And What Does It Means For Canadians. That being said, other businesses can benefit from the extra amount of cash. In other words, the beneficiaries of this decline of oil prices are not only the citizens, but other business owners as well. The reason why oil prices fluctuates it is because of the law of supply and demand, which states that if the supply is low then the price will be high and if the demand is low then the price would be significantly low, which is the case for gas today. But why is the demand for oil that low? The price of oil has been dropping for over year by now, going from $100 to $40 and the reason behind is that people around the world are more aware of the environment, encouraging think greener, which resulted in creating energy-efficient vehicles decreasing the demand for
Scherer, Ron. "US to Tap Strategic Petroleum Reserve to Drive Gas Prices down." The Christian Science Monitor. The Christian Science Monitor, 23 June 2011. Web. 09 Apr. 2012.
The oil companies, the customers, and the average employee will not benefit from the construction of this pipeline. If the pipeline does its job, it will take the whole load of oil from Canada to the United States. The other companies which are already responsible for transporting oil will not be required to do their jobs, as it is being done for them. All of these companies will go out of business. With three more pipeline plans in place for Canada, people are wondering whether they will ever need to build a new one again.
Since fuel is regarded as a necessity, the increase of fuel prices would have a certain impact on the Australian economy. This will have an effect on a variety of economic aspects which include; demand and supply, elasticity, market equilibrium and disposable income. The goal of this analysis is to discuss the effect that the rise in petrol, holding all things constant (Ceteris Paribus), will have on the Australian economy.
Currently, the most important factor in the rise of gas prices is the increasing cost of crude oil. Unfortunately, the United States has three percent of the world’s oil reserves. (Horsley) In 2009, the United States was third in crude oil production as well as the world’s largest petroleum consumer. (e. I. Administration) Such consumption required and still requires the United States to import petroleum/crude oil from other countries.
In 2004, crude oil producers around the world expected a 1.5% growth in the world’s demand for crude oil. The actual growth rate was more than double the projections at 3.3%. This growth was due to rapidly industrializing of foreign countries such as, China and India. Therefore the lack of crude oil affected the supply of gasoline to consumers at the pump.
The WTI is described as light because of its relatively low density, and sweet because of its low sulfur content (Cite source). The WTI is the underlying commodity of New York Mercantile Exchange 's (NYMEX) oil futures contracts. If we calculated using the current buying power of U.S dollar, i.e. after eliminating the effects of inflation in the past 45 years, from 1970 to 2015, according to the NYMEX, the crude oil price of WTI has moved from 15 to 120 dollars a barrel (Cite source). When recalling the oil prices in the past to predict for the future, we have seen a lot of vicissitudes phrases. From 1974 to 1985, oil prices moved within a range of 50 to 120 dollars per barrel. From 1986 to 2004, for almost 20 years, oil prices range between 20 to 50 dollars per barrel. There are two exceptions for that time frame, however, when the crude oil price raised above 50 dollars ceiling or fall below 20 dollar floor is when Iraq attacked Kuwait in 1990 and when the Russian Federation devaluation its currency in 1998 due to the effect of the economic crisis from the East Asia in 1997. Later, from 2005 to June 2015, oil prices returned to the 1974-1985 range, which is between 50 and 120 dollars
Then if the price is set to low the demand would increase, lines at gas station would become extremely long and oil companies may not be able to keep up. So if the oil companies cannot keep up than the supply of gas could decrease dramatically which would cause
The article by Mike Moffatt shows the price elasticity of demand for gasoline. According to Molly Espey the average price elasticity of demand for gasoline in the short- run is-0.26 and -0.58 In the long-run, which is a 10% raise in the price of gasoline lowers quantity demanded by 2.6% in the short- run and 5.8% in the long- run.Also, there are a studies were conducted by Phil Goodwin, Joyce Dargay and Mark Hanly at review of income and price elastics in the demand for road traffic and each of them has different study. Furthermore, the realized elasticities depend on factors such as the timeframe and locations that the study covers. If the gas taxes will rise, will cause consumption to decrease.
The price of the crude oil also decrease from $112 a barrel to $108 barrel from 2011-12 to 2012-13.
Gas has many effects in our society, and some of these effects have a negative impact in our life. Our daily lives depend on gas, when we go to work, school and going out. We use gas for electricity, cars and many other things. The effects of gas are direct and very affecting in our lives because of the many forms it can be used in. There are many negative effects of rising gas cutting back in vacation time, prices of everything is going up “inflation”, car companies making more efficient cars.
barrel and per gallon has gone up significantly worldwide. The price of oil has already passed
The thought of rising gas prices is something a person thinks about when summer arrives and it is time to put gas in their vehicle. More people travel in the summer, especially for family vacations, which increases the demand for gasoline. Also, in the summer there are natural disasters that happen, such as hurricanes that will cause a spike in gas price. Gas prices are determined by many factors, and supply and demand are one of those factors. When it comes to gas, gas is something that people want to purchase, and the sellers want to sell.
According to Douglas, (2015) low oil prices place strain to African oil exporting countries such as Nigeria while net oil importing countries stand to benefit as costs decline the fuel prices also decline. Although in South Africa it’s much helpful considering Eskom increasing importance of diesel as it struggles to generate enough power to meet demand (Douglas, 2015).
According to Forbes Magazine “Domestic oil output has surged by 50% since 2010, creating more than 1 million jobs while slashing some 800 million barrels off of annual imports. Shale gas production has risen to more than 10 trillion cubic feet per year from nothing 15 years ago. Oil prices have stayed high, but U.S. consumption has been flat for five years, the U.S. uses 7.5 billion barrels per year. Resulting in $100 billion a year in petrodollars that now stay in the U.S. instead of...
The price of oil is one of the most important indicators of the economy. Oil, first and foremost in the energy sector, is used as inputs in various sectors. The impact of oil price changes on stock market has been widely discussed by academic researchers, investors and policy makers. Overall, the aggregate stock returns is positive or negative depends on whether crude oil prices driven by demand or supply shocks in the crude oil market (Kilian and Park, 2009).