By Ben Tenpas
It may be coming soon to a town
near you. The fabled under $3.00 gas price is looming close in many parts of
the country and can even be purchased already in others. But it leaves the
question is this a return for good, or will it just shoot right back up again? The good news is that the drop in price seems
to be backed in good reason rather than false pretense. One of the biggest reasons for the price drop
is the 12% increase in supply from last year that combines with the decrease in
demand brought on by more fuel efficient vehicles, to lower the price.
In the video below, the CEO of
Shell weighs in on the price of gas and what controls it. Because it fluctuates
so much, people might disagree with the statement above that the price changes
fluctuate on simple, supply and demand, but the CEO says that it is just that.
Despite the complex look to the average eye, the price will rise and fall with
demand just as any other product does, except here, the market is set up to
allow both small and large price fluctuation to allow the companies to maximize
profit.
http://www.youtube.com/watch?v=z8xRhz5xv70
So it seems to be a solid economic change and it is quite a relief to Americans as they go to the pump and experience something good for a change. It leaves a little money in their pockets and might even provide a boost to the economy. As of 2011 America was only importing 45% of the oil that it was consuming which is huge in bringing back the economy. As more people begin to take advantage of the lower prices, the American companies making over 50% of that gas will benefit greatly. But the question remains, is that enough of a boost to jumpstart the economy again? I hope so. Research shows that the prices are here to stay for a while and that is good for long-term demand. People may be rushing to the pumps now to take advantage but if demand doesn’t rise too much in the next couple weeks, it seems as though the prices will continue to fall to a much more reasonable price than what we have seen in the last 2 years.
So it seems to be a solid economic change and it is quite a relief to Americans as they go to the pump and experience something good for a change. It leaves a little money in their pockets and might even provide a boost to the economy. As of 2011 America was only importing 45% of the oil that it was consuming which is huge in bringing back the economy. As more people begin to take advantage of the lower prices, the American companies making over 50% of that gas will benefit greatly. But the question remains, is that enough of a boost to jumpstart the economy again? I hope so. Research shows that the prices are here to stay for a while and that is good for long-term demand. People may be rushing to the pumps now to take advantage but if demand doesn’t rise too much in the next couple weeks, it seems as though the prices will continue to fall to a much more reasonable price than what we have seen in the last 2 years.
However, looking at the graph it is hard to be hopeful, as
the fluctuations in price have been anything but consistent. It isn’t hard to
say that the typical American likely feels the same way as well. Gas just hasn't been predictable enough to be
the final blow to this recession. Simply put, it is a volatile industry that
just doesn’t have the trust of the American people that an industry needs to be
a huge contributor. It will for sure, put more money into the
economy if the prices stay low and people continue to end up with more
money in their pockets. I believe that keeping the price down, through
continued use of domestic oil, and continued positive relations in the middle
east, will allow gas to be one stepping stone to bringing the economy back to
strength again.
Sources:
Geewax, Marilyn. "Declining Gas Prices Pump Up
A Shaky Economy." NPR. NPR, n.d. Web. 11 Nov. 2013.
"The White House
Blog." The White House. N.p., n.d. Web. 11 Nov. 2013.
I truly do hope that we can keep gas prices down over the next few years, but when I look at the graph of changing prices I am uneasy about this idea just like you. Also I think that if we are able to keep the price of gasoline down, it will indeed turn the economy around because it will be a cheaper resource that we are consuming from the Middle East and people will save more.
ReplyDeleteYour relationship between the the demand of oil because of fuel efficient cars, and the supply increase because of this was really well placed. It provided a solid foundation for the rest of your post. Personally, I went to the pump two days ago and filled up the Civic's tank for only $28 compared to my normal $35ish dollars. With this extra $7 I decided to stop by Noodles, where I otherwise wouldn't have.
ReplyDeleteThe relationship between the decrease in demand and fuel efficient cars, was a very smart comparison. But I'm sure this decrease of the price of gas will not stand, it will most likely get inflated since the holidays are nearby.
ReplyDeleteThat is an interesting theory, but what if, instead of the gas price increasing because of people traveling for the holidays, a massive plague kills 80% of the population. Then, with such a significant hit to the population, all services across the world would essentially dissipate while the remaining bags of meat who happened to be immune to this deadly epidemic scrounged for the remaining resources, in an attempt to hold on to what little life they have left. Taking all of this into consideration, the price of gas would be completely insignificant compared to issues that would arise, such as starvation, cannibalism, violence, theft, and depression from a complete lack of motivation to keep wandering the desolate wasteland left in what was once a bustling community with a strong economy where people still cared about gas prices.
DeleteI hope the gas prices do stay down, but looking at the information provided it's very hard to tell whether they will stay down or if they will rise in the near future. Also, it would be nice if out relations with the Middle East stay good because if they do, we will continue to get the gas for less, which means it costs less at the pumps resulting in happy people in America.
ReplyDeleteAs the weather gets colder people do not drive as much to go to do other outdoor activities and that will decrease the demand for gasoline and lower the price. I would expect gas prices to start to rise as the holiday season approaches with people traveling to see relatives during thanksgiving. Also on black Friday when many Americans are driving around looking for the lowest prices will increase the demand for gas.
ReplyDeleteEven though gas prices have only been down for a short period of time, it can do nothing but help the economy. Nearly every industry is affected by gasoline prices considering the fact that the goods must be trucked or flown somewhere. Lower prices should in theory give more profit to the production managers, and more take home pay to the workers: in theory. Even if this does not happen having lower gas prices gives extra money to everyone by saving money at the pump. With all the short term benefits of lower gas prices common knowledge would tell you that in the long run it should give and economic boost, but only time will tell.
ReplyDeleteI think you hit the nail on the head with your comment on how crucial oil independence is for the continued growth and development of our economy. In an economic recovery, a nation cannot afford to be dependent on the supply from countries that may or may not be friendly to our ideals. When we're dependent on a country that has no stake in our success, we are susceptible to their every whim. It is crucial that we maintain energy independence if we are to remain a global economic power.
ReplyDeleteWith the gas prices dropping, it helps everyone in some way. While the gas prices like you said are anything but consistent, if they can continue to stay on the lower end, the prices of other goods could possibly drop as well. The companies won't have to spend as much on gas transporting the goods, so the cost they need to make up for on gas will not be as high. With this happening, the dollar will go further than it has been able to.
ReplyDeleteNow a days we are depending so much on fossil fuels, and until renewable energy become efficiently, the fuel prices will continue to play a huge role in our economy. The lowered prices benefit more than just drivers. Factories running engines will save huge amounts of money producing goods, and might lower their prices with increased supply, which would leave people with more money in their pocket to spend on another good. The question remains whether the prices will stay down or not.
ReplyDeleteThe graph you posted definitely assured me that gas price will always be raising an lowering drastically. But I do think we should try to keep it at a low price, we will always be buying gas because we do need it on a day to day basis, but I remember when I was in 7th grade and gas price was almost $5.00 my parents would not drive me ANYWHERE because they could not use up the gas they had in their car already, proving that while gas prices sky rocket people are filling up their car less and even doing less driving.
ReplyDelete