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Changes In The Supply, Demand And Pricing Of Crude Oil And Gasoline

Essay by   •  December 13, 2010  •  451 Words (2 Pages)  •  2,147 Views

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The price of crude oil is the primary factor in the pricing of gasoline. U.S. refiners as well as other refiners worldwide are competing with one another to obtain crude oil. Refiners in the U.S. now import more than 60 percent of their crude oil from foreign sources (FTC, 2005). When the prices of gasoline fluctuate, whether it be an increase or decrease in price, the fluctuation is due to the increased or decreased pricing of crude oil.

Additional factors in the pricing of gasoline and in the supply and demand of this product are the increased demand for refined products such as diesel fuel and heating oil, a growth in the population which effects the need for additional crude oil and gasoline, the war in Iraq and weather, such as hurricane season, to name a few.

In the 1990's, crude producers were able to increase their production when necessary, enabling them to meet the demands of crude oil and gasoline therefore being able to keep the pricing stable. Over the years, U.S crude oil reserves have been depleted which has caused a reduction in the ability for the industry of domestic crude oil to keep up with the demand for the products.

Due to the war in Iraq and some of the pipelines being destroyed, there was less production of crude oil, a lesser supply of gasoline and a large increase in the demand for both. Due to the decreased amount of production and availability and the demand for more of the products, the prices of both increased significantly and maintained an all time high for quite some time.

Also noticed was the increased demand for these products during the last few years of hurricane season. Some refineries had been damaged to the point that their production fell by 83 percent or 1.4 million barrels per day, causing some retail stores in several states to run dry for days at a time. However, once production began to increase again, the demand for crude oil and gasoline remained high and stayed constant for several

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