According to an article written by the CNN Staff, US gas prices have lately been going up excessively. The most recent survey conducted last Friday reveals the exact increase in prices; 5.3 cents more. As many people ponder the reason behind this dramatic increase in gasoline prices, this article clearly uncovers the answer. The reason retailers decided to raise their gasoline prices was simply because of the extreme price of ethanol. Since ethanol is primarily a source of gasoline, it's no wonder why the prices have had to go up.
The textbook, Working With Economics, provides a lot of insight in terms of analyzing the reason behind this gasoline incident. Since the rise in gasoline prices was not a factor of consumer behaviour, it must therefore be a supply concept. In consonance with the textbook, the increase in production costs (ethanol) led to the sudden increase in supply which resulted in increased prices and decreased quantity exchanged. As well, 'our demand remains very weak and our supply very strong' (paragraph 10) in the article also states the same thing.
Although paying up to $3.16 in the United States for gas is ridiculous, keep in mind that the companies are only trying to accommodate their prices with that of ethanol. Rather than judging the gasoline companies for their extreme prices and cringing at the thought of paying that much per litre, save the complaining for something else. As stated in the article, 'bad employment numbers and expectations' (paragraph 5) is only proof that we are all just trying to get by. Doesn't matter if it's surviving as a company or as a person. Additionally, I personally think that the increase of prices of gasoline because of the expensive ethanol will have an overall positive impact on our planet. If the demand of gasoline continues to drop, people will travel around no longer promoting global warming.
Lorena Laurencelle
In the next few years, gasoline prices will continue to increase. As a result, people will be driving hybrids or more fuel efficient vehicles. I think we will be seeing a new revolution of cars within the next decade.
ReplyDeleteIt is interesting how you made the connection between rising gasoline prices with increasing ethanol prices. The question then is is the price of ethanol increasing. I think the answer lies in the fact that gasoline is an inelastic product, and that people have to fuel their cars. People can resort to more fuel efficient vehicles, as I mentioned before, but they still use gasoline. In the future, gasoline will become more and more inelastic as time goes on, and substitutes will appear.
-justin wan
I agree with you that retailers have to raise their prices if their primary source of gasoline, ethanol, is expensive. I know ethanol is extracted from corn because I have learned about it. However, aren’t there other resources in which they could get gasoline from? Lately, have heard that Hillary Clinton said something like, “...get dirty oil from Canada...” in the news. If they could get a cheaper source of gasoline, it would reduce the production costs in the supply side of the market which would in turn result in a decrease of price and an increase the quantity demanded. Since the public wonders about the price increase in gasoline it might indicate that gasoline tends to be more elastic than inelastic in this situation. I think the biggest factor for that is that it takes up a large percentage of the budget of most people since most of them use cars as their main transportation. I also agree with you that it will be better for our planet if people reduce the amount of gasoline consumption due to the decrease of the release of greenhouse gases.
ReplyDeleteElena Jiang Su