|Higher Gasoline Prices Fuel Debate Over Causes|
|Topic||Supply and Demand/Equilibrium|
|Key Words||Price, Wholesale Prices, Demand, OPEC, Production, Cost|
In a matter of two weeks, the price of gasoline at the pumps has risen by eight cents to a national average of $1.08 a gallon. The increase is the fastest since the Persian Gulf War in 1990.
Retailers have raised their prices because refiners have increased wholesale prices. This has been made possible by the demand for gasoline, which is very high because of the strong economy, seasonal increases in driving, and the increased use of gas-guzzling cars such as sport-utility vehicles.
One industry economist stated that the increase reflects the higher price of crude oil and the seasonal introduction of gasoline that pollutes less but costs more to make. However, while the Organization of Petroleum Exporting Countries (OPEC) is planning to cut back their production of oil in an attempt to increase its price, it has not reached final agreement. Hence the wholesale price increase cannot be blamed on the oil producers. The price that refiners paid for the crude oil that was used to produce the gasoline currently being sold was in fact quite low.
Drivers are seeing the cost of driving increase. Businesses that rely on transportation are seeing their costs rise. However, there is little sign of consumers cutting back as yet.
(Updated May 1, 1999)
|Source||Agis Salpukas, "Gas Prices Rise 8 Cents at Pump In Two Weeks", The New York Times, March 23, 1999.|
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