Gas Pipeline

Paper Summary:

This paper discusses the market conditions brought about by a supply interruption of gas in Arizona during the summer driving season. The economic concepts of supply, demand, and equilibrium are examined to represent what would occur in the given circumstances. Further examination of the supply and demand curves is offered. The paper explains how the market forces cause a shift of both the supply and demand curves and that the resulting conditions would thus conspire to create an upward pressure on prices before equilibrium is established.

From the Paper:

"In the given situation where a major gas supply line is interrupted there are several environmental and economic factors that need to be considered to fully understand the effect of the product interruption. Environmentally, the Arizona market is a severe hot-weather market that relies on motorized transportation with no practical viable alternative transportation methods that can be temporarily utilized such as biking or walking. Additionally, the supply interruption occurred at the height of the summer season which presented several contributing factors: 1) summer is the traditional high-demand period for gas in any market and 2) the season and the traditional high demand combined to create a sense of special urgency regarding this sudden market interruption. These circumstances, when combined with the natural effects such market interruptions have on supply and demand curves, created a perfect storm of conditions that caused the natural market equilibrium to lose all balance and begin to function."

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