Gas Prices and the Economy

In: Business and Management

Submitted By Paul0618
Words 1528
Pages 7
Gas Prices and the Economy

The marketplace of supply and demand determines the price of fuel. If demand grows or if supply decreases, there will be an increase in pricing. On the flip side, if demand declines or if there is a surge in supply in the market, there will be a decrease in pricing. If a retailer in the market prices its gas too high without regard to competitors’ pricing, consumers will take their business to the competitor with lower prices. If the retailer loses enough business due to higher pricing, they will lower the prices to be more competitive in order to retain customers. Retailer competition affects gas pricing which can be seen by price differences on stretches of highway with multiple gas retailers. More choices generally mean more competition for the retailers. Even though many retailers carry the gasoline of major oil companies, they are independent dealers of the product and can set prices as they wish. The cost of foreign trade is contributes to the rising cost; however, many other factors contribute to the pricing of gasoline which drastically affects buyers and sellers in the marketplace.
According to the Chevron Corporation, like agricultural products, such as wheat and corn, and precious metals, such as silver and gold, crude oil is traded on the world market. Recently, crude oil prices have risen dramatically, driven by rising global demand and political instability in several oil producing countries (“The Price of Fuel…”). Since crude oil is the primary raw material used in producing gasoline and other petroleum products, it is essential in price determination of gasoline. The price of crude oil may account for up to half the price of a gallon of gasoline. After crude oil is processed through a refinery and turned into gasoline, it is transported to a terminal, where it will be sold to a wholesaler for distribution to…...

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