Gas Price Elasticity
The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800 service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12, 2000, increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents over the past month (Anonymous, 2000).How far will it rise? What will consumers do about the dramatic increases that are occurring with the arrival of each shipment? Price elasticity of demand would indicate that demand will fall as prices continue to rise, which in turn should result in a reduction of prices and a subsequent increase in demand. Such may prove to be the case, but the scenario is an unlikely one. Prices have increased all over the country, but price increases in the Midwest have been even more dramatic than in other areas. Across the region, prices are averaging $1.874 for a gallon of unleaded, but that same product is well over $2 a gallon in many of the cities of the Midwest. Higher grades average $2.003 across the region, marking the first time that avera
Anonymous (2000, June 19). Record Gasoline Prices for Fourth Week in a Row. Reuters at www.aol.com. Anonymous (2000). The Strategic Petroleum Reserve. US Department of Energy, Fossil Energy at http://www.fe.doe.gov/spr/spr.html. Brodrick, Cynthia E. (2000, February 15). How do gas costs affect consumers? At http://aol.thewhiz.com/2000/02/000215d.asp. ge prices have been so high in a specific region of the country (Anonymous, 2000). There is so much concern over the rising prices that apparently are continuing to rise without abatement that the Federal Trade Commission (FTC) has "opened a formal investigation into soaring gasoline prices in some areas of the Midwest and will begin issuing subpoenas to oil companies by the end of the week" (Hebert, 2000; p. aol). There are several factors that could change the elasticity of price for gas, such as the availability of substitutes; the proportion of income that gas usage requires; and whether it is considered a luxury item or a necessity. Even then, relatively few cancel travel plans. Unless there is a gas shortage so that availability is uncertain, Americans generally continue with their plans regardless of price.
Some common words found in the essay are:
Fairfax Va, Department Energy, Petroleum Institute, Durbin D-Ill, Exxon Mobil, Northeast Asia, Brodrick Cynthia, Commission FTC, Forecast Prices, anonymous 2000, final cost, Week Row, brodrick 2000a, gasoline prices, oil companies, percent final cost, percent final, cents gallon, brodrick 2000, final cost gasoline, brodrick cynthia, unless gas, travel plans unless, final cost consumer, plans unless gas,
Approximate Word count = 1271
Approximate Pages = 5 (250 words per page double spaced)
|
