Surge Is Unlikely for Prices of U.S.

¶ … Surge Is Unlikely for Prices of U.S. Gas," by Clifford Krauss (Krass, 2013). There were four main points of distinction embedded within the article. The first and arguable most important element within the article was in reference to the growing conflict in Syria. The article was written in late August when unrest in the Middle East was near its height. During this period, Americans were concerned with the subsequent rising oil prices that might occur due in part to the civil unrest occurring in Syria. The article first explains how gas prices are unlikely to increase due to a litany of factors. First, Syria is a very small oil exporter. It exports roughly 1% of the world's oil. As such, even if the entire country were to be engaged in war, the resulting damage in regards to oil exports would be minimal. Many pundits believe that the rippling effect of a Syrian unrest would have adverse consequences for the world's economy (Seale, 1987). This, at a time of tepid economic growth, would undermine much of the progress that is occurring in the worlds overall economy. Second, many developed countries are now becoming energy independent in regards to their overall activities. Electric vehicles, the discovery of natural gas, and alternative energy solutions are abated foreign dependency on oil. For example, the auto industry, which is heavily reliant on petroleum, based products in undergoing fundamental change. Electric vehicles have now entered the market at a blistering pace. Manufactures from Ford, to Tesla, are now mass producing alternative energy vehicles that perform very similar to their petroleum-based counterparts. In fact, many electric vehicles have larger fuel efficiencies, more durability, and are more environment al friendly than many, more established car lines. Although the infrastructure isn't yet available to support a wide adoption of electric vehicles, the future looks very promising (Kay, 1997). This ultimately reduces much of the developed world's dependency on foreign produced oil. Instead, alternative energy provides an adequate solution to consumer grievances.

The third major point of the article pertains to the high worldwide demand for petroleum-based products, even though, alternative energy solutions are available. Emerging markets, primarily those within the Asian region, still rely heavily on petroleum-based products which balances outs the price reducing activities of developed nations. This is due to the emerging middle class of developed nations. Many nations, particularly Brazil, Russia, India, and China, are beginning to embrace capitalism. As such, they are now more prone to develop systems that enhance the overall market economy. Petroleum is a natural progression for many of these economies as it is a cheap energy source. As such, as these economies grow, so too will their demand for petroleum-based products, which have become a cornerstone of their society. The fourth and final major point of the article relates to gasoline usage overall and its unique attributes relative to other commodities.

Gasoline prices have very unique attributes relative to their other commodity counterparts. For one, this commodity, unlike others, is price inelastic. The elasticity of demand is very pertinent to many commodities outside of gasoline. In many instances, a change in the price of gasoline does not correspond to an equal change in the demand or consumption of the commodity. This is due primarily to the overall nature of the gasoline market. Many consumers, particular those who travel long distances to work, rely heavily on gasoline to travel. As such, many consumers are often force to consume higher price gasoline irrespective of the overall price change (New Billions In Oil, 1933). This is indicated by the charts below highlighting the overall consumption of gas relative to its price. Chart 1, taken for the AAA motor club, indicates the overall changes in gasoline prices over the past decade. Although the prices are very volatile since 2005, notice the overall upward trend.

Chart1

Chart 2 below, taken from the Energy Intelligence Agency, indicates the overall level of consumption over the corresponding period. As you will notice, the trend of consumption, much like its pricing counterpart, has steadily increased over time. Thankfully due in part to increase fuel efficiency standards, carbon emission requirements, and the emergence of electric vehicles, consumption has remained tepid.

Chart 2