Economics James Bork
October 11, 2010
Over the period of 1980 to 2010 the prices of gasoline have fluctuated a lot from lows to highs. There were some drastic prices increases from 1999 to 2008 changing from one dollar to four dollars. After 2008 the prices suddenly fell off drastically but never have returned to what they were in 1999. The main cause for the rise and fall of prices over the years can be attributed to the supply and demand, while the future prices will still depend heavily on these two factors.
There were a few main causes for the sharp rises in gas prices during 1999 to mid 2008 time period. The sharp rise in gas can mainly be contributed to the increase in the price of oil. The high prices of oil are attributed to the cases of supply and demand. The supply of oil has not increased enough to meet the new demand. Demand for oil has increased over the years in a few countries while the supply stays constant causing the price increase. The price of gasoline is also heightened by the taxes, the cost to refine oil into gasoline, the transportation costs, and the profit of the gasoline dealer. The main causes for such a drastic change in prices are the change in demand from a few countries while the supply of gasoline has remained almost constant over the years span. Secondly, there were a few factors that caused the big gasoline price drop off in the latter part of 2008. As the US reached further into recession the demand for fuel dropped off sending oil prices down more than 50%. With the price per gallon of gasoline reaching well over four dollars a gallon many people nationwide continued to travel less and less causing the demand to drop and eventually prices too. Then came the hurricane and the stock market crash, which in turn caused the prices at the pump to steadily drop like a rock. Also the dollar began to gain strength against the euro, and the threat of inflation began...