Motor oil

As we can see, gasoline demand continues to rise each day despite the fact of high priced motor gasoline. Goldman Sachs in its Energy Weekly report stated that gasoline demand growth continues to be driven by year over year price changes which average to a modest 5% change during 4 weeks. We can observe that crude oil prices are reaching a 9 month high of $71.00/bbl. US crude inventories built 2 billion barrels due to the strong response of the refining system to the extraordinary high cracks due to the increase in demands for oil reaching 10.9 million b/d. We can suspect that the crude oil inventories are decreasing due to the high market demand from consumers. Also providing the fact that some drivers aren’t driving efficiently because in the cities, frequent stopping and starting will decrease the efficiency of gas, also driving at a moderate speed of 55 mph will help save gas. Furthermore, getting vehicles such as Jeeps, SUV’s aren’t that economically fuel efficient; therefore, causing them to spend more oil and increasing the demand for oil.

Relation to Chapter 6

We can really relate this to chapter 6 aggregate demand for goods and services. The demand for oil is continually rising due to the fact that it is an inelastic good. Consumers are usually ordinary citizens and they get their income from their workplace each month and minus tax, they will have their disposable income. However, that disposable income, there would be some that goes to paying for mortgages, loans, food, and most of all, gasoline for the car. This continue rising of the prices might also lead people into investing more into the oil industry because they expect the future prices to go up; therefore, making profit off of it. Then we can look at the psychological factor where people start to purchase cars that are fuel efficient and can save a bit of money from each month’s gasoline expense. So, gasoline prices are affecting our daily lives, and as well as increasing the GDP of the country due to high consumption. However, if the oil prices are going to continue to rise, when will it drop?