Rising Gas Prices
1158 WordsApr 4th, 20125 Pages
No Room Equals Big Bucks
There are many different elements that contribute to rising gasoline prices. The major cause for increasing gasoline prices has to do with refining capacity. Even if oil were inexpensive, we would still have a problem converting it into the gas that fuels our economy. That is what keeps the gas prices high. When gas supplies are short, due to an “inability to refine crude oil into gas efficiently,” prices increase.
This is a component of supply and demand economics. In a positive aspect, rising gasoline prices do serve a purpose; they curtail usage so that we do not eventually run out of fuel. If gasoline continued to retain its cheap price, despite how much was available, people may pull up to their…show more content…
It’s like pouring oil into a funnel; a fixed amount will come out the skinny tube no matter how much oil one pours into the wide opening. Rosenberg presented a puzzling question on this matter: “Why was the national average for a gallon of gasoline in 2007 $3.25 when a barrel of oil cost $60 and now that oil is $100 a barrel the price for a gallon of gasoline is $2.80?” (Para 2, Rosenberg).
The answer is consolidation. Consolidation is when two or more companies or corporations merge together. Consolidation in the refining industry has limited America’s refining capabilities. The three biggest American oil companies ExxonMobile, ConocoPhillips, and ChevronTexaco were once six individual companies. There was a time when the oil industry was not making an astronomical amount of profit, like they do now. When they merged, they also bought out some of the smaller refiners. The top refiners now control more than half of the refining capacity in the United States. Unfortunately, this has allowed the big oil refiners to tightly control gasoline reserves, thus greatly affecting availability and prices. Without a competitive market the consumer will continue to suffer because there is no incentive for big oil refiners to increase refining capacity when there is a shortage. Spending millions to construct new refineries to produce gasoline faster will only lower their profit margins. Big oil companies made multi-billion dollar profits in 2005 with Exxon
Increase In Fuel Price Essay
The hike in fuel price have been an issue when the government recently announced that there will be less subsidies given due to the shortage of fuel around the world. This has caused a huge debate within the country and most are dissatisfied by the governments' decision. In this essay we will discuss on the advantages and disadvantages on the fuel hike that is affecting the economy as well as the consumers.
One of the disadvantages that fuel hike have on us is the impact on cost of living especially on the hike in food prices. This effect the transportation cost as food is delivered from one place to the other. Thus the rising cost of transportation is added into the processing cost that which of course will raise the prices of the final goods especially in the suburb area. For example, fast food company McDonald's distribute their product throughout the country. They have to raise their goods price to ensure the market margin does not fall below the profit expectation.
Other than that, the disadvantages of the hike in fuel price can cause higher inflation. The inflation rate will increase by four point two percent from an earlier projection of two to three percent later this year, and grow to five point two percent early next year. Though, this is a short-term effect. If the situation can be control through measures and observations in the fuel price by the government it can make the inflation rate drop to three percent later next year. As Malaysians, we together have to face these bitter moments wisely. Confidence in the royal efforts in handling and reduce the need to increase the impression is always there within us. We need to carry out our own responsibilities even when it comes to daily shopping.
However, with the increase of fuel prices, there are some advantages too. Fuel is known as...
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