What Impacts Gas Prices?
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The paper discusses the price of crude oil and how it is determined by supply and demand and by speculators in the global commodities markets. The paper also looks at the impact of federal and state taxes, refining costs and marketing and distribution costs. The paper notes that the most relevant of these components of oil prices remains the price of crude oil, and while the price at the pump cannot be attributed entirely to the fluctuations in the price of crude, there is a strong correlation. The paper points out that the key for consumers is to understand that the presence of speculators in the commodities markets increases the volatility in the crude oil market. The paper concludes that as long as this is the case, and emerging nations continue to increase their consumption, the price of gas will have significant upward pressure exerted upon it.
From the Paper:"Crude prices are also affected by speculators on the global commodities markets. Oil is traded on commodities exchanges such as the New York Mercantile Exchange, and is typically purchased on credit (leverage). This increases the amount of oil that any one investor is able to sell. Commodities exchanges have historically been immune from speculative buying because the buyer must take physical delivery of the product. This has historically limited the market to oil companies, airlines and other major users. However, speculators have been able to enter the market, as long as they are able to unwind their positions before they are forced to take delivery. This speculation increases the volatility in the oil markets, such that over the first half of 2008 they behaved irrationally. A large number of unusual investors are recorded in this group - the California pension fund, Harvard Endowment fund, hedge funds, sovereign wealth funds and a variety of institutional investors (Kroft, 2009)."
Sample of Sources Used:
- Website: Energy Information Administration. (2005). A Primer on Gasoline Prices. Retrieved May 9, 2009 from http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/primer_on_gasoline_prices/html/petbro.html
- Website: Energy Information Administration. (2009). Refining. Retrieved May 9, 2009 from http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/refining_text.htm
- Kahn, Chris. (2009). Gas Prices on the Rise, Crude Ends Week Strong. Associated Press. Retrieved May 9, 2009 from http://www.google.com/hostednews/ap/article/ALeqM5i5TtajgUpSm7KY5jf-lCJGHBB-tAD98288UG0
- No author. (2007). Annual Energy Review 2007. Energy Information Administration. Retrieved May 9, 2009 from http://www.eia.doe.gov/aer/pdf/aer.pdf
- No author. (2005). FTC Blames Oil Demand of US Gasoline Price Rise. Reuters. Retrieved May 9, 2009 from http://www.allbusiness.com/retail-trade/food-stores/4486257-1.html
Cite this Analytical Essay:
What Impacts Gas Prices? (2011, October 27) Retrieved November 28, 2020, from https://www.academon.com/analytical-essay/what-impacts-gas-prices-148580/
"What Impacts Gas Prices?" 27 October 2011. Web. 28 November. 2020. <https://www.academon.com/analytical-essay/what-impacts-gas-prices-148580/>