Gasoline Article Analysis
Principles of Microeconomics 365
October 8, 2013
Lori Smith

The business of energy research is booming, along with intense efforts to find a replacement for fuels manufactured from crude oil, especially gasoline. The article details how gasoline demand varies with price and income in addition to air pollution impact. Although there are many efforts to find an alternative fuel it will probably not replace gasoline in U.S. automobiles. The Federal Government has funded efforts in order that alternative fuel vehicle fleets and refueling stations can run by natural gas to cut down on the pollution. Many of the state programs encourage the use of alternative fuels by exempting ethanol from motor fuel taxes or mandating the sale of electric cars. Cleaner burning gasoline has been in the works over the last ten years which has significantly reduced air pollutants. The removal of sulfur reduced pollution from all vehicles and a change to gasoline engines and testing of tailpipe emissions will add to the efforts. In all these effort which ultimately cost the consumer more money to conduct, they benefit from more fuel efficient vehicles and a less polluted environment. The United States oil futures are on the rise according to the Department of Labor’s report of the creation of approximately 165,000 jobs in their July report (Bureau of Labor Statistics). The oil prices had fallen below seventy eight dollars per barrel as of June and climbed to ninety one dollars and forty cents per barrel in trading. The prices have also been affected by a sharp rise in European Brent crude. There was another rise in prices due to the fire at Chevrons Richmond California refinery, that fire decreased the output of gasoline and diminished the amount available on the market adding to the price increases (White, 2012). Consumers are not consistently adjusting their driving habits but over time and continued increase of gas prices may lead consumers to reduce the number of miles that they are driving in an average household with below average incomes. The lower income families may also opt to give up their automobiles because of the rising cost also associated with maintenance and insurance as well. Households in different socio-economic groups and geographical area would react differently to the same price stimuli where rural households would possibly respond less to a price change than urban households because of the reduced availability of alternative transport modes. Wealthy individuals usually have two or more automobile which require them to purchase additional fuel and they are able to afford higher airlines tickets and not cause a burden to their financial situation. The law of demand states “Quantity demanded rises as price falls, other things constant or alternatively quantity demanded falls as price rises, other things constant (Colander, 2012). In this article the price of gasoline has not reduced the quantity demand for the product. There may be shift factors impacting the increasing demand for gasoline even though the price has also been increasing such as, a rise in income and prices of other goods. The article also mentions that other areas of spending on goods and services would be reduced in order to make up for the increasing cost of gasoline. The supply of gasoline in the Unites States is readily available but the government chooses to purchase fuel from other countries. This process in turn leads to higher gasoline prices for everyone. The United Stated decided against drilling offshore because of the mess it made with the last oil spill which cause havoc to individual’s homes, work and the environment. There is no equilibrium price for this because individuals are making less money and the oil prices are raising