Refining costs also account for 19% of the price at the pump. Most refining takes place close the market, although the U.S. is served by some refineries in the Caribbean. The greatest amount of U.S. refining capacity is along the Gulf Coast (EIA, 2009). There is no evidence that an increase in refining costs occurred to justify the price increases recorded. However, there was a capacity shock during Hurricane Ike. The impending hurricane forced refineries to cease operations. The threat of supply shortages caused a rebound in prices, which had been declining over the course of the summer prior (Schoen, 2008).
The final variable, marketing and distribution costs, is often cited as a source of gas price spikes. Gasoline companies are handed significant blame, although more often than not they are merely the messenger that the public is shooting. The oil companies are buyers on the commodities market, and are as apt to be caught up on supply/demand mismatches as any other oil purchaser. The one area where oil companies do make a contribution is with percentage markups. This means the markups are higher when the price is higher and lower when the price is lower. As a consequence, oil companies make higher profits when gas prices are higher. This creates the illusion that they are controlling the prices, but that is not the case.
Of the four components of fuel prices, the most relevant remains the price of crude. Over the past 30 months we saw world demand surge as a result of expanding Asian economies. Supplies were not increased to match this demand, driving prices upwards. As the global economy began to falter, demand fell back in line with supply, resulting in a decrease in gas prices.
The second major factor, albeit a controversial one, is the rampant speculation on the commodities markets. Oil was rising, and speculators went to cash in. This drove the bubble of the first half of 2008. With that bubble now eliminated, the price of oil has fallen back into its normal equilibrium. This has resulted in a substantial drop in the price of crude, which in turn results in a substantial drop in price at the pump.
Other factors play a much less important role. Taxes have remained steady, so played no role in the run-up in oil prices nor in their subsequent decline. Other factor costs have remained relatively steady, barring the speculation of a supply stoppage during Hurricane Ike....
The political situation in the Middle East is extremely volatile. The political situation in the Middle East can have a dramatic impact on oil supplies. However, threats to the oil supply are beginning to emerge outside of the region as well. For instance, there are political situation beginning to arise in Russia, Venezuela, and Nigeria (Federal Reserve, 2004). Political instability can disrupt the supply of oil from a particular
The former might be, 'What specific...' [while] Less structure might be exemplified by: "Please respond to the following in your own words: I....'" (Dereshiwsky, 1999) in addition: adding some open-ended items such as these to a more traditionally scaled quantifiable survey, such as one with Likert-scaled attitudinal items, and/or "check/off" questions on demographic background variables, is a good way to make the survey "multimethod" in nature. This is because you'd
Surge Is Unlikely for Prices of U.S. Gas," by Clifford Krauss (Krass, 2013). There were four main points of distinction embedded within the article. The first and arguable most important element within the article was in reference to the growing conflict in Syria. The article was written in late August when unrest in the Middle East was near its height. During this period, Americans were concerned with the subsequent
Microeconomic Effects of an Increase in Gas Prices When considering the ever-changing and highly competitive global landscape of business today, it is striking how many firms continue to rely on fossil fuels (particularly gas) as a primary means of facilitating operations. The functional inputs of countless organizations in countless industries are at the mercy of gas providers. Transportation mechanisms, factory machinery, construction equipment and climate control systems almost always require a
Surging Oil Prices on the U.S. Economy Although the lingering effects of the Great Recession of 2007-2009 continue to dissipate and economic growth resumes, volatile global oil prices remain a source of concern for economists and consumers alike. While the experts debate the precise date at which peak oil will be reached and the search for alternative energy sources has assumed new importance and relevance, it is clear that the
Houston's large supply of land means that demand growth primarily results in more construction, not higher prices" (McCullagh & Gilmer, 2008). However, it is important to realize that land supply is only one part of the reason that new home construction formed such a large part of the Houston housing market. Yes, Houston has more available surrounding land than almost any other major metropolitan area in the United States, but
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