Cause and Effect on Gasoline Prices Essay Example | Topics and Well Written Essays - 750 words

Cause and Effect on Gasoline Prices - Essay ExampleThe outlay of crude petroleum and how its effect is felt at the pumps is an issue of interest in as far as the determine of louse upoline gases is concerned. Gasoline is produced from crude anoint through di close upation process whereby crude oil is heat and fumes captured are converted to various products including gasoline. Thus the cost of extracting crude oil as comfortably as the cost of processing it to produce gasoline will definitely affect the price of its products. For antecedent, the price of crude constitutes up to half or more of the price of gasoline gallon as suggested by Gupta and Demirbas (73). The rise in the price of crude oil has been driven by the increasing rent for oil globally and the political instability in most of the oil-producing countries according to Gallun (723). Therefore these factors end up directly affecting the price of gasoline. The depreciation of the US dollar when compared to other cu rrencies of other countries contributes to the changes of gasoline gas price. This put forward be attributed to the fact that when the US dollar changes its value, there is a shift in the demand and be of countries with different currencies. For instance the dollars depreciation against the Euro by half, the Countries using the Euro pay half more in dollars and then increases the demand. If the Us dollar depreciates, investors in return have to shift their capital there is the rise in price of crude oil gases hence affecting price of Gasoline gas according to Obadia (23). The founding wide demand and interpret for crude oil affects the price of gasoline gases in different ways. This is because demand and supply of crude oil is influenced by the organization of Petroleum Exporting countries it sets price of oil products produced by its members. This organization also holds the biggest percentage of oil supply in the world and thus it dictates the terms of supply of oil products as suggested by Boyes and Melvin (11). In terms of demand, during the summer there tends be to a good deal of gasoline gas demand hence if demand exceeds supply the prices bare likely to rise. It is therefore adjust that imbalance in supply and demand leads to fluctuation in the price of gasoline gases according to internationalist Monetary Fund (56). For instance if there is fast rise in demand or brisk fall in supply due factors such as refinery there may occur a rapid depletion for gasoline gases. The future of oil manufacturing and the contracts made on the future date and price for exchange oil in a way affect the price of gasoline gases. On one slip away with increasing technology, the future may experience increased demand for gasoline gas compared to the source of this gas and thus prices may end up increasing. On the other hand the increasing alternatives of sources of energy permutation the use of gasoline in future are likely to lead to a decrease in price of the g asoline gases. The future increase in retail gas stations which will still share the market with the existing ones will lead to lower prices in order to attract customers. almost contracts have been established to decide on the future date and price for selling oil products. For instance a Collar contract is a mini-max strategy assuring producers of oil either a stripped or maximum range of prices for the sale of oil in the future as suggested by Gallup and abrupt (221).