Macro Economics - Oil and Gas

1681 Words Aug 26th, 2013 7 Pages
Reagan Moore
Martinez
Macro Economics
June 30, 2013
Oil and Gasoline Prices in the US Oil and gasoline prices follow a trend that sparks mixed reactions from different industry stakeholders in the America’s economy. The trends on oil and gasoline and their stability have immense impact on the performance of the economy based on their primary as energy. The government’s ability to ensure stability in price movement is seen as a key step towards fostering steady economic growth. A variety of factors are at play in the determination of these trends exhibited by the oil prices in America. Some of these factors are attributable to the market forces and understanding them would be instrumental in resolving economic problems resulting
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Another factor that has contributed to the upward pressure on prices is the increased concern on production levels of oil in the oil producing regions citing the Middle East and Africa (Yellen 3). The impact of the falling international oil production implies that oil supply may not match the world oil demand, which results in an upward pressure on oil prices. The US EIA indicates that the refineries’ maintenance procedures play a part in the soaring oil prices (US EIA 1). These maintenance procedures occur every time the demand for oil shifts from the low prices during the mentioned unfavorable conditions towards a peak. For instance, during winter season, the demand for fuel is relatively lower, which gives the refineries an incentive to switch to low production of oil and gasoline. The onset of warmer seasons prompts a shift back on production of the much demanded summer-grade blend during where certain production processes have to be halted (US EIA 1). The production lags involved in the transition periods accompanied with higher costs when producing the summer-grade gasoline could account for the higher pump prices. Additional contributors to the price increase are high demand for gasoline coupled with skyrocketing crude oil prices (US EIA 1). The high demand for gasoline is attributed to the high number of drivers on the road during the summer and other energy intensive activities. The EIA report indicates that crude oil prices

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