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Supply, Demand, And Price

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Supply, Demand, and Price

Economics is: the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society. This according to, "Colonder: Economics, fifth edition. Chapter 1", He also went on to say that one of the key words in the definition of "economics" is "coordination". I believe that coordination would be a good way to describe, "Supply and Demand". On paper or in a textbook supply and demand seems pretty simple, but as we shall see real life is not as simple.

We shall take a look at "gas prices, where they come from and where do they go". We realize that prices are not going to grow legs, or are they? The way that gas prices have been running amuck it sure seems like they have legs. It is like running up and down hill with drivers trying to catch the best deals.

Who sets the prices? Strangely enough the customers do with their demand for the gasoline. Demand can bring prices down faster than they go up, or at least at the same rate. When prices go up and up then drivers need to do some comparison shopping, just as they would probably do for shoes. There are websites out there that will help with the search for lower prices, such as AAA Automobile Club. Go to and enter your ZIP code. They have prices from thousands of cities in the United States. By shopping around that and that alone could help to show the other station owners that in order to get the business they are going to have to lower their prices also, this according to Sean Comley, spokesman for the AAA of Northern California auto club. A number of people that I have asked a few of my neighbors and they told me that if demand took a day off then the surplus of gas would lower prices. In other words, if drivers didn't drive for one day or even one-half day supply would build up and prices would have to be lowered. That is a good thought although a bit optimistic.

We have looked at demand, but where did all this pricing start. First let us look at OPEC (Organization of petroleum Exporting Countries), OPEC was formed in 1960 and didn't have that much involvement in oil prices. Since they have become 11 countries strong they have had a lot to say about the oil prices, as in dictating what the price per barrel shall be. The founding five members are: Iran, Kuwait, Saudi Arabia, and Venezuela. In 1971 six other nations joined the group: Qatar, Indonesia, Libya, United Arab Emirates, Algeria, and Nigeria. This information was made possible by James L. Williams, WTRG Economics. These are the countries that produce and control most of the world's crude oil. In 1971 it was different Texas, Oklahoma, and Louisiana were pretty much in control of Oil prices and were allowed to produce all the oil that they could, because turmoil in the middle east what with Iraq trying to invade Iran and the Arab countries boycotted any country that supported Jerusalem. Now the price of a barrel of oil will cost anywhere from $52 to $57. These barrel prices equates to approximately $2.30 per gallon on average across the United States.

Cost of the price of oil is not only the result of OPEC. The U.S. Government with their taxation policy add 19% to the price per gallon at the retail pumps. This, according to a pamphlet, "A Primer on Gasoline Prices", May 2006 by an unknown author. To bring this



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