• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Rising Gasoline Price and its Effect on the US Economy

Extracts from this document...

Introduction

Gas prices have been steadily rising for the past six years. According to the U.S. Department of Energy, the average retail price of gasoline in the United States in March, 1999 was $1.05 per gallon and has risen to $2.50 per gallon in August, 2005. Rising gasoline prices are having a negative impact on the economy. "Higher energy prices were responsible for a jump in American inflation. Consumer prices rose by 0.7% in January, leaving the 4% higher than a year earlier."1 Rising gasoline prices affect both individuals and businesses, but small businesses are being hit the hardest. Small businesses generally do not have a large financial reserve to cover rapidly increasing costs such as gasoline. Small businesses with delivery services have been the hardest hit segment. Gasoline costs are a major expense for business like florists, moving companies, and pizza delivery services. These businesses take a double hit due to the rising gasoline costs. Their delivery expense has risen and distributors are charging more for their products because their delivery costs are higher as well. The moving industry has suffered a loss in profits even though they have added a fuel surcharge to their costs. ...read more.

Middle

Demand plays a major role in the price of gasoline. "High demand is led by the United States market, the source of an increasing percentage of the world's demand for petroleum. The U.S. economy currently accounts for one-quarter of all demand."4 China leads the third world nations in crude oil demand. China is developing a car culture similar to western countries and their manufacturing industries are experiencing rapid growth as well, adding significantly to world demand. Supply is also a key player in determining gasoline prices. There is fear that oil suppliers will be reduced in future years. This fear is based on many existing and emerging world circumstances. The growing turbulence in the Middle East is one of the most critical factors. The Middle East is the world's largest oil producing region and turbulence in this area threatens the world's oil supply. Other factors include the war in Iraq, Iran's emerging nuclear program, and the instability stirring in Saudi Arabia after the death of King Fahd. All these factors could lead to a dramatic decrease in the supply of oil. ...read more.

Conclusion

Many factors contribute to rising oil prices. Political instability is the norm in the major oil producing nations. This unrest has existed for many years with no end in sight. The recent threat of terrorism could have a disastrous affect on the economy and oil supplies at any time. In addition, the United States oil supply is threatened by natural disasters caused by unstable weather conditions. And, demand for crude oil keeps increasing with no end in sight. While many believe price gouging is at least partially responsible for rising gasoline prices, research indicates it is an incredibly small piece of the pricing puzzle. The price of crude oil reflected in the rising price of gasoline is determined by market forces of supply and demand. The future will continue to see fluctuations and increases in the price of crude oil and gasoline. Many factors contribute to this existing pattern. We live in a world of increased demand by industry and individual consumers. Society is unwilling to make the necessary sacrifices needed to help stabilize crude oil demands. Americans continue to drive gas guzzling SUV's and avoid car pooling like the plaque. We are a spoiled society willing to pay the price for our desired life style. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Macroeconomics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Macroeconomics essays

  1. Budget 2004-05 and Economic Analysis of Pakistan

    During the year, Pakistan added $1.8 billion to its reserves despite pre-payment of expensive debt. EXTERNAL DEBT: Until a few years ago, Pakistan was facing serious difficulties in meeting its external debt obligations. Following a credible debt reduction strategy, Pakistan has not only succeeded in reducing the stock of external

  2. Economics - House Prices.

    So these are the main things that affect the price of a house, but I think that unemployment is the major factor affecting the price of a house. I will now talk about why I think unemployment is the main thing that affects house prices, I will compare the price

  1. Unemployment Report.

    Classical unemployment describes the unemployment created when the wage is deliberately maintained above the level at which the labor supply and labor demand schedules intersect. This can be either caused by trade union power or by the introduction of a minimum wage level above the labor market clearing wage level.

  2. Pakistan is in the grip of a serious energy crisis that is affecting all ...

    Recently, the discovery of low-ash, low-sulfur lignite coal reserves in the Tharparkar (Thar) Desert in Sindh province, estimated at 1,929 Mmst, has increased both domestic and foreign development interest. PATTERN OF ENERGY CONSUMPTION BY USER CAUSES OF ENERGY CRISIS The world is facing a daunting task to meet the growing

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work