National Average of Gas Prices 2000-2001

The demand of gasoline has increased steadily over the last twenty years. In 1981 the U.S. averaged 6.5 million barrels of gasoline consumption per day. By comparison, in 2004 the U.S. averaged 9.2 million barrels of gasoline consumption per day. For most of this time period, gas prices stayed relatively the same. This is because the U.S. refineries increased their production to meet the demand and maintain the equilibrium price. Also during this same time period worldwide demand for crude oil increased 27%. Crude oil producers also increased their production to meet the demand keeping prices the same.

On April 29, 1974, the New York Times ran an article titled “For Gasoline, Little Is Certain But High Prices,” which began with an 18-year-old nursing student from Westchester, NY panicking at the long line in front of the gas station just to get the fuel to commute for class. “Miss Galgano…had been trying since 7 A.M. to get enough fuel.” The dire yet cruel reality of a shortage meant that gas stations had to close down “four lines on [her],” along with millions of other Americans waiting on line for hours. The piece was a vividly jarring depiction of the first ever oil supply shortage since the end of the war. The shortage was blamed on the embargo the Organization of the Petroleum Exporting Countries (OPEC) initiated in 1973, when President

October of 1973 was the start of an epidemic that would lead into the 21st century. This was the start of the oil crisis, and this would not be the last. An oil embargo was claimed by the members of the Organization of Arab Petroleum Exporting Countries. This trend continued into March of 1974 when the price of oil barrels had risen by an astonishing $9. This caused a worldwide oil shock. In 1975 gas prices were on the rise and topped off at about $2.00 nationally, but this was not the last increase, just five short years later the prices were on the rise again and this time they hit an all time record in 1980 at nearly $3.00 a gallon. Gas prices continued to fluctuate yearly, and have not yet remained constant.

From 2010 until the end of 2014 oil prices remained relatively constant. With very little fluctuation over these four years, the average price per barrel of oil was around 110 dollars. That price has been more than cut in half within the past year. The price for United States crude oil is now just 48 dollars a barrel, the lowest it has been since 2009 (BBC News). So what is the cause for this sudden change and to what effect will this have on the United States’ economy as well as the global economy?

OPEC was founded in 1960 with 5 counties and the goals to be a dependable oil market for themselves, and to stimulate economic growth in other countries. Leading up to the 1970’s OPEC’s growth and business was relatively unnoticed until an Iranian revolution and Arab oil embargo pushed oil prices to new levels. Changing consumer opinions about oil and over supply led to a market crash in 1986; but from 1990 through to 2000 prices strengthened from increases in technology and a more global market. In 2008 the stock market crisis rippled through all industries and even caused the oil market to suffer. Oil prices then rebounded and at June 2014 oil prices set a record high. OPEC currently has just under 40% of the market share and

Have you wonder why the prices on your local gas station has drop significantly?  It came to a point where a barrel of WTI crude is 3 times cheaper than a barrel it 's put in. This all plays into the hands of government officials and smart investors seeking for greater influence and profits. It mostly comes from the same roots of the past relationships some country could seek as an economical threat. Which all the problems come back into the present day doing a lot more damage for future generations to handle. In another sense, this economical problem actually does benefit the average consumer, however it’s a step backward towards an environmental friendly sociality and hard oil workers in the fields. Nonetheless, the oil crisis has been a very sophisticated strategic plan in order to take out other competitors and looking forward to stability in the monopoly.

Another important factor that determines the price of gas is the worldwide demand. The emergence of developing countries like India and China have fueled the demand for oil (Graham & Graham, 2005). When the supply is unable to meet the demand, the price of oil spikes. Oil is traded around the world in US dollars. When the value of US dollar decreases with respect to other countries, then the OPEC countries earn less. To compensate for this lower profit, they will increase the price of oil and this will cause the prices to rise at the pump. The reverse happens when the value of US dollar increases with respect to other countries.

Is it true what experts say, when the price of oil drops the economy gets better, and when the price of oil rises the economy suffers? Of course as consumers we love to pay less at the gas pumps, but as we play much less now for gas then we did last year many of us are suffering due to the dramatic drop in the price of oil. As I strongly agree that the low cost of oil is hurting the economy in general, as I was one who fell victim to the recession working for an oil company up until January 2015, but fell victim to lay off due to the big drop in prices.

The past decade has been characterized by a high degree of volatility in global oil prices, beginning with a significant increase in 1999 that continued to accelerate until 2003, reaching an unprecedented pricing level of $145 a barrel in July 2008 (Ono, 2011). The Great Recession appears to have stunted this acceleration in oil prices, though, at least in part and

Oil is a huge part of everyone’s everyday life. From transportation to heating homes and businesses, oil prices are always dramatically changing due to the constant change of supply and demand. The economic impact that the price of oil has on the U.S economy continues to rise and fall due to political instability. Americans especially have a heavy reliance on oil, especially on foreign origins. The increasing price of oil has spiked large concerns and has become a major global debate. Many sources of oil are in economically and politically unstable regions and countries like former Soviet Union, the Middle East, and Africa. Not only is oil affected by this instability, prices are also determined by natural disasters and political issues. Due to an increase in demand, oil prices in 2011 increase instability due to more instability in oil producing countries like Saudi Arabia because of conflicts and uncertainty. The oil industry is one of the Commanding Heights of the global economy and therefore should not be regulated. It is a global commodity and is the most efficient method of allocation through the free market.

Price is depended on supply and demand. There are two different laws: The Law of Demand and the Law of Supply. The Law of Demand is a relationship, which involves price and quantity. It states that as the price of a product goes up (oil goes up), the quantity of the product (oil) will go down; therefore, this is a strong relationship between price and quantity. The Law of Supply, however, is the direct relationship between price and the quantity in which the seller produces. So as price goes up, the quantity the seller will produce will go up because the price allows for the seller to produce more output. Demand shifts are caused by economic growths. Economic growth is an increase in the capacity of an economy to produce goods and services, from a certain

Aside from the 2008 crisis, prices of oil have never been cut in half in a matter of months since 1900 – until just recently in 2014. What might’ve caused this steep decrease in prices? Well, it appears as though the surge in US oil production had a primary role in breaking the market. Meanwhile, demand had remained fairly stagnant. Extensive federal intervention into the United States’ oil and gas markets began back in 1930s and continued well through the

“When OPEC was formed in 1960, its main goal was to prevent its compromise the world’s largest oil producers, refiners, and marketers—from lowering the price of oil, which they had always specified, or reported. OPEC members sought to gain greater control over oil prices by

Many factors within and outside of the United States have supply and demand affects on the supply of oil. There are factors within the United States that affect the supply and demand of oil, and there are factors outside of the United States that affect the supply and demand of oil. Based on the analysis of each of these categories of factors, I predict oil prices within and outside of the United Stares will definitely rise.

Empirical studies on the relationship between crude oil prices and stock market returns date all the way back to the early 1970’s. Jones and Kaul (1996) have found a negative relationship between the oil prices and stock market returns. (Nandha and Faff, 2008; Sadorsky, 2001) Supports the fact that oil price changes also have been seen to have a positive effect on oil and gas industry returns. There have been many variables affecting the way in which this correlation is looked upon. Narayan and Sharma (2011) have studied the relationship between stock return and the oil price shocks based on firm sizes. Tsai (2015) has studied U.S how U.S stock returns respond differently to oil price shocks pre-crisis, within the financial crisis, and post financial crisis. However, based on the specific time period Kilian and Park (2009) found that the effect of the stimulus package dominated the effect of oil price shocks and provided evidence that the U.S stock market was still thriving, representing a positive relationship between crude oil prices and stock market returns. An economy with higher oil prices, increase the discounted value of cash flows of oil firms, assuming these prices are able to be passed onto customers.