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Essay on Consumer Behavior As It Relates to the Recent Increase in Gasoline Prices
Gasoline prices across the country rose more than 14 cents in the past two weeks and show no signs of slowing their climb. The rise was caused by increased demand created by market pressures and seasonal environmental regulations requiring a move to costlier formulas. So far the higher prices have not chased demand away, and the biggest demand season is yet to come.
Oil prices climbed back into record territory on 24th May 2004 after energy traders shrugged off pledges by Saudi Arabia to increase production and focused instead on discord among members of the Organization of the Petroleum Exporting Countries and the shutdown of a major oil platform in the Gulf of Mexico.
The theme for 2004 appears to be similar to that of 2003 the gasoline prices are still volatile, very unpredictable, and the bottom is not likely to fall out in the near future. At this point in time, the natural gas market is reaching an important choice point, and that may not be good news.
The nation is impacted by higher oil prices by direct, indirect, and induced economic multiplier effects. Direct impacts are the increased expenses for purchased oil or oil products. Indirect impacts include the changed prices paid for other products and services, which pass along the higher fuel costs in the product prices. Last are the induced impacts of price increases.
The initial direct and indirect impacts cause consumer prices to rise, and this feeds through to wage increases, which raises labor costs, which, in turn, raises the prices of products and services. The U.S. General Accounting Office (GAO) in “The Prospects for Economic Recovery,” (Amuzegar, 2001) February 1982, concluded that the increase in oil prices directly and indirectly caused most of the high inflation in the 1979-1981 period.
For consumer prices, the GAO looked at the direct increases in expenses for consumer’s for gasoline, fuel oil, etc.....
