Why do fuel prices fluctuate

7 Oct No Comments

A major topic of discussion today is the price of fuel. Over the past several years the price paid for a gallon of gasoline, diesel fuel, or jet fuel has been fluctuating. Indeed, all products that are derived from crude oil have been affected. In your initial post please discuss the following:

1        Why do fuel prices fluctuate?

Answer

The main reason why fuel prices fluctuate is due to the strong global demand, limited spare oil production capacity and political instability in oil producing countries.

2        There are many products use some derivative of crude oil in their production. Research five of these non-fuel or lubrication products. Do not list fuels or lubricants. List these products and state whether the price of these goods has followed the price per barrel of crude oil. If so, explain how?

Answer

1)     Asphalt

2)     Bulk tar

3)     Petroleum coke

4)     Slack wax

5)     Sulfur

The price per barrel tends to affect the price of these products. This is because an increase in the price per barrel tends to increase the prices of all products derived from crude oil.

3        Will the United States be able to stop using crude oil?

Answer

Yes the United States will be able to stop the use of crude oil only if some other sources of energy were explored:

a)    Use of coal as a source of energy to run the industries

b)    Use of renewable energy such as wind, tides, solar energy and hydropower.

c)     Use of biodiesel as a source of energy

4        Do environmental factors such as drought have an effect upon gasoline prices? If yes, how?

Answer

Yes. Environmental factors do have an effect on the prices of gasoline. In instances where an oil producing country is hit by drought, drilling companies may have to evacuate their workers and cease operations or supply the workers with food thus increasing the cost of the oil. In the oil non-producing countries are hit by a drought, more resources may be required to fight the drought and to get this revenue, the government may increase the tax levied on gasoline thus increasing the price.




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