Everyones Gas Problem

In: Business and Management

Submitted By demeowm
Words 460
Pages 2
BUSINESS ECONOMICS ECON545
JULY 2013 SESSION

CHAPTER 15 QUESTION 14.

Everyone’s Gas Problem
When we discuss fluctuating gas prices, we have multiple reasons why this may occur. To begin, the price of gas could rise and fall due to breaks in the distribution. An example of the breaks in distribution could be a hurricane in areas of supply or an up rise or political upheaval in an area like Libya. Second, we can look at how close you are to a particular area of the US that would be near oil production or proximity. Third would be competition. How many stations are supplying gas in a certain area or region? As we get closer to a city like Chicago, prices may increase because of higher taxes. “According to the EIA, every time you pay for a gallon of gas, you are not only paying for the price of crude oil (61% of cost), but also federal and state taxes (15%), refining costs and profits (15%) and distribution and marketing (10%).” This is a classic case of supply and demand in economics which relates to the chapters we have discussed. Upon reading about gas and crude oil, I have learned that there are different types of oil. Light/ sweet oil is in high demand because it takes less time to refine into gas which in turn results in faster production. The price of light oil is higher because the supply is low. Heavier/ sour crude oil takes less production and is more readily available in turn the price is low. “Chicago, like most big cities, is required by the federal Environmental Protection Agency to use pricier "reformulated" gasoline in the summer. It's a cleaner gasoline, aimed at reducing smog-forming and toxic pollutants in the warm summer air. Reformulated summer gas, mandated to be used every year from June 1 to Sept. 15, requires more expensive additives and costs up to 10 cents more than the regular gas formulation that most of the country uses. So,…...

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