PRICE ELASTICITY OF GASOLINE

Price Elasticity of Gasoline



Price Elasticity of Gasoline

Oil prices rose close to a barrel yesterday (Thursday) after the effects of rising less than expected in U.S. gasoline inventories to talk again about the elasticity of demand for oil in the United States the largest consumer in the world, reinforcing concerns about inflation.

The price of U.S. light crude oil contracts in August / August cents, per barrel, extending gains, which amounted to about a dollar on Wednesday. At the International Petroleum Exchange in London the price of Brent crude Brent crude cents, dollars per barrel. The price of gasoline jumped by three percent on Wednesday after U.S. government data showed an increase of thousand barrels in gasoline stocks, despite the high refinery production compared with the forecast to rise by stocks, million barrels. The price of gasoline contracts in July, to cents, dollars per gallon (Bernstein, 2006).

The total U.S. demand for gasoline in the past four weeks, millions of barrels per day higher, percent below a year ago. And ignored the rise of markets, million barrels in crude stocks, the U.S., the highest level in eight years. The data partially calmed fears that lead to tighten monetary policy to reduce U.S. oil consumption in the United States but the situation is different in other countries of the major consumers of oil. In Japan the third largest user of oil, government data showed a decline in crude imports in May more than a quarter from April to their lowest level in two years, with refiners shut down for extensive maintenance in the spring. Sales of West Africa to Asia for download in July to their lowest level in nearly a year as it looks Chinese refineries to reduce stock levels after demand fell more than expected (Bernstein, 2006).

For firms in the planning of the volume and structure of production is extremely important to know what determines the demand for its products. As we have seen, the magnitude of demand depends on prices of goods and income of potential consumers, as well as prices for goods that are either complementary (eg, cars and gasoline), or interchangeable (for example, butter and margarine, some types of meat, etc. ..) Demand is influenced by other factors (www.fueleconomy.gov).

Fig 1

In the previous graph there is a clear inverse realtionship between consumption per capita and price. The same relationship exists in the second graph but is ...