The Cost Of Gas Prices - 1595 Words

Oil is one of the most valued products in the world—which means oil can be very inelastic. It is something that people need in order for them to keep their cars going and for many other reasons in this world. When the cost of gas drops down, the usual consumer’s response is positive, however, that might not be the case for some producers in the market. The lower cost of gas means that people will be able to save money—which is exactly what any consumers would want in the market. Specific consumers who benefit the most from cheap oil are working and middle-class people who spend an unbalanced amount of their money on gas to fill up their cars and to heat their homes. As a result of cheap oil, the amount of money that people will save can now go to expenses like buying a new car, purchasing new electronics, traveling elsewhere, or even as small as going out to a nice dinner (p.34). All these results will cause a hotel boom, a restaurant boom, and labor shortages that will increase wages (p.36). However, with the positive side of cheap gas comes the negative side as well. The effect of cheap gas on producers is not the same as the effect that it has on consumers in the market. The decrease in oil prices are pressuring gas producers responsible for the domestic energy boom. Also, when prices of barrel drops significantly, the activity in the shale basins is not very profitable—which means drilling of oil has to come to a stop (p.35). This will cause an unemployment of people whoShow MoreRelatedThe Cost Of A Gallon Of Gas Prices1626 Words   |  7 PagesIn January 2016, the cost of a gallon of gas dropped below two dollars, and consumers were rejoicing. Driving that car with twelve miles to the gallon car wasn’t so bad. Going to the grocery store was a little cheaper because of the transportation costs of goods. 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TransportationRead MoreGas Price Elasticity1349 Words   |  6 PagesGas Price Elasticity The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800 service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12, 2000, increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents over the past month (Anonymous, 2000)Read MoreThe Cost Of High Transportation Costs912 Words   |  4 Pagesroduction costs. According to Wagner (2008) oil is grated by its viscosity (light to heavy) and by the amount of impurities it contains (sweet to sour). The heavy/sour crude is more available, but less preferred as it contains impurities and needs more processing to refine into gas. The cost of processing heavy/sour crude oil is high; this is why the price of sweet/light crude oil is much higher than heavy/sour crude oil. So, high production costs of gas make the supply elasticity lower. Transportation