Kyle Dethloff
Mr. Reuter
Economics
3 November, 2014
Decreasing Gas Prices
Everytime time you drive by a gas station you have a tendency to look at the prices to see what that days prices are. For about the last three months the price of gas has slowly decreased, and coming to a US average of $2.968 per gallon. One of the reasons for the gas prices decreasing is due to the fact that people aren’t driving as much. It happens every year after labor day, with the temperatures dropping, summer vacations ending, beaches closing, and amusement parks closing for the season. This all means that Americans have fewer reasons to hit the roads. Another reason for the decrease in gas prices is that cheaper blends of gas are being refined for the winter. During the winter the government starts to ease off clean-air standards for oil refineries, allowing them to make gasoline with cheaper hydrocarbons. Refineries would love to benefit from the cost savings, but they usually don't. Petroleum traders know they can buy gasoline at lower prices without hurting the refinery's profits, which means the prices usually drop in response. Looking at the graph on the top is gives you an idea of what the gas prices looks like over a months period. The line has a steady decline, and hopefully you will continue you to decline. 
As gas prices are constantly changing, gas is always being in supply and demand, knowing that it’s an essential need/want to our everyday life. With the gas prices dropping, motorist are starting to find more and more money in their pockets, after going to the pumps. Economics think a fall in gas prices are going to help stimulate the economy by giving people more money to spend on other goods. This is a good thing for the holiday’s, because when people have more money in their pockets, they are going to be willing to spend more on gifts. When customers spend money on gifts it will help the US economy get a boost, with consumer spending making up roughly 70% of the economy.
The graph above shows you what states have the lowest gas prices, with Wisconsin having the 3rd lowest gas prices, and states like Texas with the lowest prices of $2.701 to $2.822. When you look at the graph below, it shows the gas prices over the last 120 months. You can see that our gas prices have been all over the place due to anything from the oil inventories getting smaller, to the weather. With oil being a global product that we can’t live without, oil prices are being determined by how much we need the product. A strong global demand growth for petroleum in the mid-2000s was a major factor in record high prices for crude oil and gasoline in mid-2008. This was mainly due to more and more vehicles being built and more gas was needed to keep them all going. The supply of gas had some disruptions which led to spikes in crude oil and gasoline prices. Major disruptions were caused by hurricanes and storms in supply regions, such as the Gulf of Mexico, political events in major oil producing countries, especially in the Middle East, and unplanned outages in U.S. refineries and pipelines.
Works Cited
"5 Reasons Why Gasoline Prices Will Drop." 5 Reasons Why Gasoline Prices Will Drop. N.p., n.d. Web. 03 Nov. 2014.
"Declines in Gas Prices May Slow to a Halt - GasBuddy Blog." Declines in Gas Prices May Slow to a Halt. N.p., n.d. Web. 03 Nov. 2014.
"Historical Price Charts." Historical Gas Price Charts. N.p., n.d. Web. 02 Nov. 2014.
"U.S. Energy Information Administration - EIA - Independent Statistics and Analysis." What's up (and Down) with Gasoline Prices? N.p., n.d. Web. 04 Nov. 2014.
If the drop in gas prices is the use of cheaper and less efficient fuel then how long will it take for the population, especially those who want a healthy environment, to begin complaining about reduced air quality. If the end goal is to stimulate the economy then why not try to stabilize it first and not throw in a future monkey wrench because as soon as gas prices jump back up because the cost of complaints outweighs the benefit of more profit for the refineries, we all know consumer confidence will fall as they have less and less money left in their pocket after each top off. The demand for larger and more fuel hungry cars has also gone up as gas prices have gone down so it looks like those with new big cars are spending just as much at the pump now as they were with their old cars.
ReplyDeleteI love how cheap the gas is at the moment, it really helps. I know how gas companies are losing their profits but they make enough money, more than they should. Overall I believe gas should stay the same as to where is it, it is where it should be compared to the inflation. So overall I believe the gas prices are good and I could really care less about how much profit the oil companies are making.
ReplyDeleteI agree with Chase, I am loving the low price of gasoline right now. Even with the low prices as of right now, the oil companies are still turning a profit. Hopefully the prices won't increase too much as time goes on, but who knows, we as Americans have little control over what happens to those overseas who ship us the oil. Which is not a good thing, but it is the way we live right now.
ReplyDeleteI think that It is really pointless how the gas prices can drop and go up like they do. But diesel is different. For myself, a diesel buyer, it seems like the cost of diesel has stayed about the same for the past couple of years. It definitely doesn't fluctuate as much as as regular unleaded fuel. I think that there should jut be a normal gas price standard and have it be decent.
ReplyDeleteI was driving past a gas station a couple weeks ago and saw that the prices finally dropped under $3.00 again and that alone made my day. When the price is cheaper, people are willing to buy more and the oil companies are probably making more by selling more at a lower price than selling less at a higher price.
ReplyDeleteLike most consumers, I like my gas on the rather cheaper end. Sure, major oil producers are losing profits but is it such a bad thing? Currently, aside from fossil fuels, there are other alternative fuels out there and while these alternatives are growing at a rather slow rate, there will eventually come a day that these big oil producers will be out of business. And so for now, it’s a shame that these companies are losing profit but what these companies don’t realize is they’ll eventually go out of business someday since at the end of the day, alternative fuels are replenishable while fossil fuels aren’t
ReplyDeleteI totally agree that a drop in gas prices is beneficial for the economy. When the price is too high people still have to buy the same amount as they did before, since it's an inelastic good, but the money they could spend in other goods, helping the economy of other businesses, is going to be wasted in gas.It's better to divide someone's income to a little bit of everything than to waste a big amount with a single good. Also, for oil companies, a drop in price doesn't make that difference because they still end up gaining a lot. And as you said, with the price getting lower, it encourages people to travel more, which results in wasting more money with gifts.
ReplyDelete