Contemporary Issues in Economics Research Paper

Contemporary Issues in Economics - Research Paper Example Therefore, this paper will seek to explicate some of the main factors that determine the gas prices, problems, causes and solutions. First and foremost, it is important to note that the supply and demand market place determines the worth of fuel. This is because an increase in demand and a decline in supply will automatically lead to a rise in price. On the contrary, if the demand goes down or there is an upsurge supply, then the fuel price will automatically decrease. In case a retailer decides to market its gas at a high price without considering the pricing of the competitors, then consumers will go and buy gas from the competitor selling at lower prices. When this happens, the retailer will lose business due to the high pricing and this will compel him to lower his gas prices in order to be competitive and maintain his customers (â€Å"What Affects Fuel Pricing†). Retailer competition also affects gas prices and this can be grasped by the differences in price on stretches of highways that have multiple gas retailers. When there are several choices that consumers can choose from; then it boils down to more competition on the retailers’. In as much as many retailers carry gas and oil from major oil corporations, they are independent merchants of the product. This implies that they have the freedom to set the prices the way they so wish. Chevron Corporation asserts that, crude oil is merchandized on the global market just like agricultural products such as corn and wheat, and precious metals such as silver and gold. In recent times, the prices of crude oil have increased dramatically as a result of the rising world demand and political instability in most of the oil producing countries (â€Å"What Affects Fuel Pricing†). Crude oil is the most important raw material used in gasoline and other petroleum products production. Therefore, it plays an integral in determining the price of gasoline. Crude oil price may be up to half the cost of one