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Heating Commodities Essay

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Heating Commodities

Back in the middle of October, the price of natural-gas had risen because a gas company was forced to shut down a pipeline due to the need for repairs. This impending shortage led to the decrease in prices for other heating commodities, as well as larger profits. The demand for energy was becoming greater and greater because it was that time of year when consumers began storing energy in their homes to prepare for the cold winter months ahead.
The four commodities mentioned in this article, crude oil, heating oil, gasoline and natural gas are all substitutes for one another. This is true because the cross elasticity of demand states that as the …show more content…

The commodity, energy, is something that people can not go without during the winter months. If their is a shortage, which means that consumers demand more than the available supply, it leads to an increase in price.
As shown in the graph below, as the supply decreases, the price increases. This means that the price is inelastic. This is true because as the price of the commodity is increased, the total amount spent on the commodity will increase also.
The price mechanism reflects scarcity, which is stated as the greater demand for a good, energy, (because of the desire to store it for the colder months ahead) with the same supply of that good becoming scarce resulting in a higher price.
Consumer's demand for energy changes with the seasons. For example, the demand for energy in the summer is probably very low. The demand for energy in the fall will be higher because consumers begin storing it for the winter. And during the winter months the demand is high, where as during the spring months the demand decreases from the other months. This commodity is greatly influenced by the climate and the type of region consumers live in. For example, people in Florida do not have the same type of energy bill as the people in
Pennsylvania do.
The market of a commodity

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