Crude Oil and Gasoline Prices
Crude Oil and Gasoline Prices
June 2009
Axia College/University of Phoenix
Crude Oil And Gasoline Prices
Since the early Seventies, energy consumers have been on a roller-coaster ride of wild and woolly price swings, producing a kind of economic whiplash. Petroleum and gasoline prices are especially prone to price volatility. Sometimes the cause of a price increase is obvious and dramatic, like an oil embargo or hurricane. Other times less so, as when a refinery goes offline for periodic maintenance, thus tightening fuel reserves. Taxes at the federal, state and local level must be factored into the calculation of gas prices. There are also recurrent charges of “price-gouging” (alleged collusion between oil companies and gas stations to artificially inflate retail gas prices) whenever supply disruptions occur and prices rise at the pump. Despite numerous hearings at the Congressional and state levels to investigate price-gouging, no evidence of such practices has ever been shown (Federal Trade Commission, 2006). To blame price spikes and fluctuations on a shadowy individual or cabal belies the complexity of the processes involved. But one of the foremost contributory factors of increased costs is the impact of environmental regulation at the state and federal levels. Though government policies are intended to protect the environment and consumers, they often interfere with supply and demand, producing price instability in the markets.
Many of the same regulations and policies that regulate oil production apply to natural gas production and costs (natural gas and oil fields are often located in the same geographical area), this discussion will be confined to gasoline and crude oil prices. Though there are innumerable components that figure in the price of gasoline, the focus of this essay will deal with the following factors: supply and demand; oil futures; environmental regulations and mandates; research and development (R&D); and tax policy.
To
June 2009
Axia College/University of Phoenix
Crude Oil And Gasoline Prices
Since the early Seventies, energy consumers have been on a roller-coaster ride of wild and woolly price swings, producing a kind of economic whiplash. Petroleum and gasoline prices are especially prone to price volatility. Sometimes the cause of a price increase is obvious and dramatic, like an oil embargo or hurricane. Other times less so, as when a refinery goes offline for periodic maintenance, thus tightening fuel reserves. Taxes at the federal, state and local level must be factored into the calculation of gas prices. There are also recurrent charges of “price-gouging” (alleged collusion between oil companies and gas stations to artificially inflate retail gas prices) whenever supply disruptions occur and prices rise at the pump. Despite numerous hearings at the Congressional and state levels to investigate price-gouging, no evidence of such practices has ever been shown (Federal Trade Commission, 2006). To blame price spikes and fluctuations on a shadowy individual or cabal belies the complexity of the processes involved. But one of the foremost contributory factors of increased costs is the impact of environmental regulation at the state and federal levels. Though government policies are intended to protect the environment and consumers, they often interfere with supply and demand, producing price instability in the markets.
Many of the same regulations and policies that regulate oil production apply to natural gas production and costs (natural gas and oil fields are often located in the same geographical area), this discussion will be confined to gasoline and crude oil prices. Though there are innumerable components that figure in the price of gasoline, the focus of this essay will deal with the following factors: supply and demand; oil futures; environmental regulations and mandates; research and development (R&D); and tax policy.
To
References: ------------------------------------------------- American Petroleum Institute, (January, 2009) ------------------------------------------------- Energy Information Administration, (2009) ------------------------------------------------- Federal Trade Commission, (May, 2006) ------------------------------------------------- Global Petroleum Research Institute, (2009) ------------------------------------------------- Investopedia, (2009) ------------------------------------------------- Oklahoma Independent Petroleum Association, (2009) Trench, C.J. (2009). Oil market basics: a primer. Retrieved July 24, 2009 from the Energy Information Administration, U.S. Department of Energy Web site: www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/ price_text.htm