Thursday, February 18, 2016

We Benefit, Oil Manufacturers Don't

Jackie Henderson
Mr. Reuter
A1 Economics
16 February 2016
We Benefit, Oil Manufacturers Don’t
Gas prices have been on a wild roller coaster throughout the past decade, but what determines the gas prices? The price of oil is a factor when determining gas prices. Oil makes up 67% of gasoline, so when the oil prices are changing, so are the gas prices.  Gas prices have been ranging from up to 4$ a gallon, to $1.45 a gallon by winter, but what why does the price for gas drastically change? There are a lot of key factors in ensuring low gas prices, but when the economic demand for gas goes down, the cost goes down. These low gas prices are definitely nice for us, they are not so nice to the supplier. Oil is traded globally, which means that something could happen on the other side of the world, and we would see a change at the local gas station prices.
   



As you see in the diagram above, from December 2015 to February 2016, the price for oil (sold in barrels) has dropped 26.62%. The price for oil has sunk so low that it will be years for it to reach the high prices it used to be.
Venezuela, Nigeria, Ecuador, Brazil and Russia are just a few countries that are suffering economic and political turbulence. Many people have been laid off because there is no need for many people working in the industry anymore, which means they aren’t getting income. It’s not people directly in the oil companies,  its companies that supply materials and different tools into the oil industry. An example are companies that produce frack, for oil manufacturing. All of these underlying factors  are shaping gas prices.
The graph shown above provides information on how many people have been laid off. All of these companies contribute to the oil industry, but they don’t need a lot of people working for them anymore since the oil prices have plunged.
Overall the point is that we are benefiting from low gas prices, but underneath that $1.45 a gallon, are companies and workers being laid off that need jobs.


Works Cited
Challenger, Grey. "Oil Fallout: U.S. Companies Kill over 51,000 Jobs." CNNMoney. Cable News Network, Mar.-Apr. 2015. Web. 15 Feb. 2016.


Reuters. "Oil and Gasoline." - Petroleum. 01 Jan. 2016. Web. 15 Feb. 2016.


Gilmour, Jared. "Gas Prices: 5 Reasons They Rise and Fall." The Christian Science Monitor. The Christian Science Monitor. Web. 15 Feb. 2016.


Krauss, Clifford. "Oil Prices: What’s Behind the Drop? Simple Economics." The New York Times. The New York Times, 09 Feb. 2016. Web. 15 Feb. 2016.

20 comments:

  1. It's not exactly fair that the government can set oil prices so low, depriving people in other countries. When the people do receive some business, the oil tycoons typically take it all and don't give much to their suppliers which is not very good and can lead to a lot of problems in the supply chain. I am enjoying the low gas prices but many people are not.

    ReplyDelete
  2. I agree that although lower gas prices are good for the consumers, it is not good for the providers. But how can their be a happy medium? The fact is that gas is always needed to fuel our cars, and if people were willing to pay $4 per gallon for it, they should be okay with paying $2.30 or around that range for it. This way less people are laid of in other countries and we still get decently priced gas. Besides, these countries depend on selling their oil in order for their economy to be stable.

    ReplyDelete
  3. As do all teenagers with a car and a license to drive, I love that gas prices are low, but I have never stopped to think about the unemployment rates correlating with the price of gas. I am happy that you brought this issue to my attention, although I wish you would've given your personal feedback on the problem. I do believe that gas prices will rise again and there will have to be more people employed to work at oil rigs, but when will that time come? In the mean time, those who were laid off are unemployed and unemployment rates in the United States are already so high. With the gas prices so low consumers are the only ones benefiting. The mixed economy we live in is sought to benefit both consumers and producers, but the dip in gas prices is not benefiting producers whatsoever and unfortunately I don't believe there is any solution to this problem. Great post!

    ReplyDelete
  4. Interesting article, but what specifically causes the lack of the need for people in the industry? Is it the low output in general of oil. changing technologies for either making oil of for the materials or a combination of both? Nonetheless nice facts, not always something you think about when you see gas for under $2.

    ReplyDelete
  5. Although i'm teenager that benefits from the lowered gas prices, I still feel an ample amount of guilt from being so positive about something that is negatively effecting others so drastically. It's extremely unfortunate that this oil issue is causing so many citizens to lose their jobs. This is definitely a problem since the only factor that's improved by this is the consumers where as the producers opportunity cost is lost from the lower prices. Definitely some heavy hitting news, hopefully we as a nation can find some way that everyone can gain a positive opportunity cost from this great oil debate.

    ReplyDelete
  6. I've found it interesting as well how gas prices have dropped lately. I attribute some of it to the increased fuel efficiency of vehicles these days as well as the increased portion of the market that is now electric or hybrid vehicles that decrease our overall demand for gas. With this decreased demand it makes sense that the price level of gas is decreasing but at the same time this causes a decrease in the total output of oil and gas and lends to unemployment like you mentioned. Personally I appreciate the lower prices, even if it means less jobs in the oil industry, so hopefully those people can find other jobs.

    ReplyDelete
  7. So you say that the economic demand has gone down and that's why the prices are dropping. This doesn't make sense to me. More people are on the roads each day. If anything, the demand for oil should be increasing.

    ReplyDelete
  8. So I also have realized how low gas prices has been and I have been really interested in knowing why. I realized why a couple weeks ago and reading this too put a different view on things. I feel guilt now that I know why the gas prices are so low because I enjoy it obliviously. However it's not because of economic demand, to me that confused me what you were trying to completely say cause it just wouldn't make sense.However I see your side and saying the unemployment rate makes sense. But you see more and more people out there driving everyday.Your also correct saying how it is bad for the producers again because of the employment rate. I think this was really interesting and opened my eyes to both sides of everything.

    ReplyDelete
  9. It's crazy how low prices have been recently, and I am honestly not going to complain. Especially since I have a European car that requires premium gasoline which I am never willing to spend. But now, I can without breaking the bank after filling up twice a month. But I am sure since more people are filling up more frequent from the prices, the demand will increase and by summer. More demand means more prices.

    ReplyDelete
  10. I find it interesting to find out why gas prices are so low recently. I never thought about how it could be related to travel, but it makes sense. I always look at gas prices as a direct result of how much oil is being brought in and how much there is, but I had never thought about travel. Since the demand for gas isn't as high now, the supply goes up and the prices go down. I agree that this is bad for the producers because of the employment rate.

    ReplyDelete
  11. Although it has been nice have low gas prices recently, it is a shame that the oil manufacturers are basically getting robbed on their paychecks. But the demand will increase a lot by summer and the prices will probably increase by summer so they shouldn't be too worried about it.

    ReplyDelete
  12. The low prices of the gasoline and oil is not due to the drop in demand, it is from the recent surrounding countries that have allowed the big oil companies to start drilling in their borders. The more oil that is drilled, the more oil there is available, which will lower the prices. I do agree however, that the low oil prices do benefit the consumers, but do not benefit the oil companies.

    ReplyDelete
  13. I had never thought to why gas has been so low so it was nice to find out that it's related to travel. While it is nice that gas prices are so low right now it sucks that the people who are providing the gas for us are basically working for free. Eventually as it gets warmer and people are traveling more the gas prices will rise and those will begin making profit again.

    ReplyDelete
  14. It's interesting that the big oil companies are laying off workers and therefore lowering the overall price of gasoline. What I was wondering is new technology and advances a big cause in why people are being laid off in the factories and plants? Or is it simply because the company doesn't want to employ a certain amount of employees? I know that the oil companies themselves are doing great financially. It is sad to see that many workers are laid off of their only income in the end.

    ReplyDelete
  15. I've never though about how us as the consumers benefiting from these low gas prices can actually be hurting the providers by losing them jobs. I also found it interesting that the more gas consumed the more jobs for the providers, meaning that by spring the price should go back up and jobs should become available once again. I have never noticed this trend looking back at recent years. Overall intriguing topic and great points.

    ReplyDelete
  16. I find it interesting that something we benefit so much from something that changes the job market. It takes away from so many people having a good occupation. Many Americans don't even consider the effect the low gas prices has on other people, so I found this article interesting. It would also be interesting to see what happens to the gas job market when the gas prices go up. Overall, great article.

    ReplyDelete
  17. It is a shame that people are being laid off because of the gas price drop but in the summer won't the prices climb a bit. More people drive then so wouldn't gas sell for more, therefore creating more jobs because more gas needs to be manufactured.

    ReplyDelete
  18. In a way, I feel like it's good that less and less people are using gas. Seeing that it is an extremely negative impact on the environment, it was only a matter of time before things started to seriously change. While it's not all that great that people are being laid off because of this--the long term impact is much nicer. As far as I'm concerned, the environment comes before failing oil businesses.

    ReplyDelete
  19. It is a concern that when gas prices drop, it is difficult for workers in that industry to sustain their jobs in the field, but they should assume that factor going into that sort of work, based on past experiences with gas prices dramatically changing. With gas prices low, more people are willing to spend the money on travel, and as this demand continues to increase when prices are low, prices might then actually begin to increase again soon, as gas will yet again be more difficult to find.

    ReplyDelete
  20. Unfortunately the low prices are hurting the workers in these countries that produce the world's oil, but as you stated it is a business and if chaper gas can be found elsewhere why shouldn’t we take advantage of it? Most of the countries that produce oil are developing countries that rely on businesses like oil production, so the loss of jobs is very influential to the economy of the country,however most of those same countries also have bountiful resources that need to be manufactured somehow so the jobs could then be filled that way.

    ReplyDelete

Related Posts Plugin for WordPress, Blogger...