Supply and Demand: Gasoline I am a husband and father of four adorable children. We need a large vehicle to haul us all around the city. And of course I would do anything to keep them safe and always want to give them the best. Therefore, after the birth of our fourth child two and a half years ago, my wife and I decided to transform our Ford Explorer into a Ford Expedition. We have everything from curtain airbags to TVs and DVD players. What we didn't know was that we had also purchased a rather large unleaded gas bill. The first time we filled the tank it cost us about $35; today it costs us about 75 dollars to fill the tank. Obviously the price of gas has increased significantly over the last couple of years. The increase in prices is due to the fluctuation in supply and demand of not only gasoline but also crude oil, which is needed to produce gasoline. Furthermore, many other factors are influencing the change in gasoline prices. In 2004, crude oil producers around the world expected a 1.5% growth in global crude oil demand. The actual growth rate was more than double projections of 3.3%. This growth is due to the rapid industrialization of foreign countries such as China and India. Therefore the lack of crude oil has affected the supply of gasoline to consumers at the pump. Another factor contributing to the gasoline supply was unexpected production difficulties. During 2004, three unrelated events had a significant impact on the supply of crude oil. The first were insurgent attacks and the war in Iraq. This has made it very difficult to properly export oil. Many Iraqi refineries simply stopped production during this period. The next event was the 2004 Gulf Coast hurricanes...middle of the chart...the line is influenced by many different factors. The most important factor is crude oil, but the supply and demand for crude oil will ultimately determine the price of gasoline. The supply and demand for crude oil and gasoline are also influenced by several factors. The price is continuously increasing and the supply is becoming increasingly difficult to produce and deliver. So it seems that we, the United States, need to find a way to slow down fuel consumption and decrease demand. This may be the only way to lower the price of gasoline. I know I wouldn't mind, because then I could use the extra $40 to buy a couple more DVDs for the kids to watch while we race around town in the Expedition. Reference: Federal Trade Commission. July 2005. Changes in the price of petrol: the dynamics of supply, demand and competition. Retrieved from http://www.ftc.gov/opa/2005/07/gaspricefactor.htm.