Supply and Demand in the Gasoline Market EssayThe substance known, as gasoline is a mixture of lighter liquid hydrocarbonsused chiefly as a fuel for internal-combustion engines. It is produced by thefractional distillation of petroleum; by condensation or adsorption from naturalgas; by thermal or catalytic decomposition of petroleum or its fractions; by thehydrogenation of producer gas or coal; or by the polymerization of hydrocarbonsof lower molecular weight. -=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-Category:BusinessPaper Title:Supply and Demand in the Gasoline MarketText:Supply and Demand in the Gasoline MarketThe substance known, as gasoline is a mixture of lighter liquid hydrocarbonsused chiefly as a fuel for internal-combustion engines. It is produced by thefractional distillation of petroleum; by condensation or adsorption from naturalgas; by thermal or catalytic decomposition of petroleum or its fractions; by thehydrogenation of producer gas or coal; or by the polymerization of hydrocarbonsof lower molecular weight.
Gasoline produced by the direct distillation of crudepetroleum is known as straight-run gasoline. This is the type of gasoline, whichwe use in our automobiles. It is this which makes gasoline a product that isindispensable and also makes it highly demandable from the driving public. Thusthe price of gasoline can also have a direct affect on what types of cars peoplewill buy. One of the problems with gasoline is that it is, for now, the main fuel forautomobiles and because of that it has become a necessity for most of the manyAmericans who own cars and have no choice but to drive to get to work, as wellas in many other parts of the world.
It is this constant need for gasoline toget us around which makes the demand part of it very high. On the supply side iswhere OPEC comes in, because they are the main suppliers for the gasoline forthe world at large. The Organization of Petroleum Producing Countries (OPEC) isa permanent, intergovernmental organization, created at the Baghdad Conferenceof September 10-14, 1960, by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. Thefive Founding Members were later joined by eight other Members: Qatar (1961);Indonesia (1962); Socialist Peoples Libyan Arab Jamahiriya (1962); United ArabEmirates (1967); Algeria (1969); Nigeria (1971); Ecuador (1973-1992) and Gabon(1975-1994).
OPEC’s objective is to co-ordinate and unify petroleum policiesamong its Member Countries, in order to secure fair and stable prices for thepetroleum producers; an efficient, economic and regular supply of petroleum toconsuming nations; and a fair return on capital to those investing in theindustry (OPEC Web site). OPECs decisions have a direct effect on the pricewe pay for gas, both here in America and around the world. If they decide thatthey want to raise the price of petroleum to $30 per barrel, then the price pergallon at the gas station will go up accordingly. Likewise, if OPEC decides tolower the price per barrel of gasoline, then OPECs decision would have adirect effect on the market price of the gas at the gas station.
The supply-demand issues in the domestic gasoline market affect all differentparts of the economy. For example, when the price for gas was extremely lowabout a year or so ago, people started to purchase more cars and many of thevehicles purchased were Sport Utility Vehicles (SUVs). These vehicles havelarger engines and tend to consume much more gasoline than the smaller, morefuel-efficient cars. (I know this to be true, because during that time Ipurchased a Jeep Wrangler, which holds and uses more gas than the smaller carthat I used to own. ) Now the price per gallon is at least 60 cents higher thenit was a year ago, which, if you do the numbers as to how much gas people use,makes it an incredible increase.
Since the use of gasoline is an absolutenecessity if you own a car, then you have no choice but to pay the higher price,since at this point in time alternative fueled vehicles arent that costefficient. In this paper I have tried to explain how the supply and demand of gasolineand its use in automobiles can affect the economy. In conclusion, until suchtime that gasoline is no longer needed to run automobiles there will be aconstant demand for the product, and there will always be organizations such asOPEC around to supply it. Works CitedBrue, Stanley L. and McConnell, Campbell R. .
Economics: Principles,Problems, and Policies. Fourteenth Edition. .