Market Equilibrating Process
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Market Equilibrating Process
Nikki Morris
AGMBA1009A
OPS/561
August 2, 2010
Dr. Augustine Hammond
Abstract
This paper will explore the effects the British Petroleum oil spill in the Gulf of Mexico has had and will have on the economies supply and demand for oil. Discussion on the market equilibrating process will occur as will an application of this to this current disaster.
Market Equilibrating Process
Oil Spill in the Gulf of Mexico
The British Petroleum (BP) oil spill is the largest in history releasing more than 100 million gallons of oil into the Gulf of Mexico. The oil spill is causing many drivers to question if and how it will affect the price of gasoline. The Energy Information Administration (EIA) does not project much change beyond the usual 10 to 20 cents increase that occurs each summer based on the current cheap global price of and the United States demand for crude oil (McClendon, 2010). Part of the reason is there has been no immediate disruption of crude oil to the United States refineries as the oil rig was doing explorations to prepare for future oil production and would not have been used to make gasoline this summer (McClendon, 2010). In contrast, the previous largest oil spill in history, the Exxon Valdez, was carrying oil to a refinery thus affecting gas prices. Although the oil spill does not directly affect the amount of crude oil and thus increase the price of gasoline, the oil spill itself can disrupt the shipping traffic, may hinder production at other offshore rigs, and new drilling restrictions may create cost burdens that could be passed on to consumers (McClendon, 2010).
Market Equilibrium
According to McConnell, Brue, and Flynn (2009), establishment of equilibrium price and quantity occurs when the market demand and the market supply adjust prices to a point in which both of these are equal. This will be found at the intersection of the supply and demand curves. A change in the supply or the demand...
Nikki Morris
AGMBA1009A
OPS/561
August 2, 2010
Dr. Augustine Hammond
Abstract
This paper will explore the effects the British Petroleum oil spill in the Gulf of Mexico has had and will have on the economies supply and demand for oil. Discussion on the market equilibrating process will occur as will an application of this to this current disaster.
Market Equilibrating Process
Oil Spill in the Gulf of Mexico
The British Petroleum (BP) oil spill is the largest in history releasing more than 100 million gallons of oil into the Gulf of Mexico. The oil spill is causing many drivers to question if and how it will affect the price of gasoline. The Energy Information Administration (EIA) does not project much change beyond the usual 10 to 20 cents increase that occurs each summer based on the current cheap global price of and the United States demand for crude oil (McClendon, 2010). Part of the reason is there has been no immediate disruption of crude oil to the United States refineries as the oil rig was doing explorations to prepare for future oil production and would not have been used to make gasoline this summer (McClendon, 2010). In contrast, the previous largest oil spill in history, the Exxon Valdez, was carrying oil to a refinery thus affecting gas prices. Although the oil spill does not directly affect the amount of crude oil and thus increase the price of gasoline, the oil spill itself can disrupt the shipping traffic, may hinder production at other offshore rigs, and new drilling restrictions may create cost burdens that could be passed on to consumers (McClendon, 2010).
Market Equilibrium
According to McConnell, Brue, and Flynn (2009), establishment of equilibrium price and quantity occurs when the market demand and the market supply adjust prices to a point in which both of these are equal. This will be found at the intersection of the supply and demand curves. A change in the supply or the demand...