Economics

Topics: Peak oil, Petroleum, OPEC Pages: 4 (1429 words) Published: April 4, 2013
Gas prices
538852
Fletchers Meadow S.S

Fluctuating Gas price
Gasoline has become an essential part of life, something in which many of us have become dependent on. The price of gas is closely watched by the millions of consumers, and with the fluctuating prices it has many of us feeling drained, and always asking a common question; why do gas prices rise and fall? There are several factors that cause gas prices to fluctuate. One factor being the price of crude oil itself. Crude oil is used in the production of gasoline, so it's an essential component. Secondly seasonality plays a part in the pricing of gas. This means at specific times during the year gas prices may differ for various reasons. Lastly futures market influence the price of gas by changing the price of oil itself. One of the biggest factors that effects the price of gasoline is the price of crude oil. Crude oil is "unprocessed" oil, that is extracted from the ground. This oil has not yet been refined, it's sold as is and is an important component in gasoline. The world's largest supplier is not just one country but rather a group of thirteen countries. These thirteen countries are known as OPEC, which stands for the Organization of the Petroleum Exporting Countries. These nations are responsible for forty percent of the world's oil production and also holds the bulk of the world's oil reserves. OPEC can manipulate the price of the oil, which in turn changes the price of gasoline (Bonsor &  Grabianowski, 2008, para. 17). How is this done? It can be explained using simple supply and demand. If OPEC wants to raise the price of crude oil, they would simply slow down production. This reduced production would cause a price increase in crude oil, as a shortage of supply has occurred. The demand that exists for oil is already high, and since the supply is low, the oil can be valued at an even higher price, so OPEC takes advantage of the opportunity and hikes up the price. For instance "In...
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