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Supply, Demand, And Price Change Essay

997 words - 4 pages

Supply, Demand, and Price ChangeFor the past 30 years, the Federal Trade Commission has investigated nearly all petroleum-related antitrust matters and has held public hearings, conducted economic studies, and prepared extensive reports on relevant issues. Since 2002, the staff of the FTC has monitored weekly average retail gasoline and diesel prices in 360 cities nationwide in order to find pricing inconsistencies that might indicate anticompetitive conduct, and to take action where appropriate. This is the only industry in which the FTC maintains this type of a price monitoring project (Federal Trade Commission [FTC], 2005).In a July 5, 2005, article titled “FTC Releases Report on ‘Gasoline Price Changes: the Dynamic of Supply, Demand, and Competition,’” the Federal Trade Commission reports that it issued a report entitled “Gasoline Price Changes: The Dynamic of Supply, Demand, and Competition” (the “Report”). The Report analyzes the many different factors that have a bearing on the rise and fall in the prices that U.S. consumers are paying for gasoline. The Report examines a wide range of gasoline price factors, including the cost of crude oil, increasing national and international demand, and federal, state, and local regulations, all of which influence the prices consumers pay at the pump. One of the Report’s conclusions is that over the past 20 years, changes in the price of crude oil have led to 85 percent of the changes in the retail price of gasoline in the U.S., while other important factors have included increasing demand, supply restrictions, and federal, state, and local regulations such as “clean fuel” requirements and taxes (FTC, 2005).The article goes on to quote Chairman Deborah Platt Majoras as stating, “U.S. consumers are frustrated by rising gasoline prices, and they deserve to know the facts. Further, only through a hard look at the facts can officials make what likely are tough decisions and devise meaningful responses to important consumer issues…the Federal Trade Commission will continue to watch closely for signs of anticompetitive or fraudulent conduct in the petroleum industry, and will take swift action against any law violation” (FTC, 2005).The article states there was a case study done by the FTC that illustrates several important points regarding gasoline price spikes on the regional level. As an example, and hitting close to home, the FTC focused their case study on retail gasoline prices in Phoenix, Arizona, during August 2003. The FTC noted that Phoenix gasoline prices were $1.52 per gallon at the beginning of August 2003, and by the third week of the month, rose to $2.11 per gallon. Due to a pipeline rupture that occurred on July 20, 2003, and the failure of temporary repairs, caused gasoline supplies to suffer in the Phoenix area. The reduced supplies of gasoline caused the price increases. Once these disruptions were corrected, prices...

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