High Gasonline Prices

In our economy today, consumers cope with high gas prices at the pump. "U.S. consumers are frustrated by rising gasoline prices." (Federal Trade Commission, [FTC], 2005) The high prices consumers are paying fits well within the economic theories of Microeconomics and Macroeconomics. The two economic theories are similar; Microeconomics focuses on how an individual's choices, influenced by economic forces and Macroeconomics focus on the economy as a whole, by considering the following: problems of inflation, unemployment, business cycles, and growth. The Federal Trade Commission issued a report entitled "Gasoline Price Changes". The report analyzes different factors that influence fluctuation in the prices that United States consumers pay for gasoline at the pumps. Factors that affect the prices at the gas pumps are the cost of crude oil, increasing national and international demand, federal, state, local regulations, and natural disasters. The Federal Trade Commission reports that in a case study, they focused on retail gasoline prices in Phoenix, Arizona, during the month of August of 2003. In the beginning month of August 2003, Phoenix gasoline prices were $1.52 per gallon. In the third week of the month, the gas prices rose to an astonishing $2.11 per gallon. The rising gasoline prices occurred from a ruptured pipeline in Phoenix, Arizona on July 2003. The price of gasoline rose at the gas pumps because of ruptured pipeline. Failing to temporary repair, the pipeline led to a decrease in the supply of gasoline. The decrease in the supplies caused price increases at the gas pumps in Phoenix, Arizona, therefore causing the consumer to absorb the price at the pumps. Another major factor that can increase gas prices are natural disasters. On August 29, 2005, Hurricane Katrina made landfall, leaving behind considerable amounts of devastation and damage to the Gulf Coast Region. Onshore refineries shut down in advance of the storm, some received damaged from the storm, and some shut down because of widespread interruption of electric power and flooding. "Hurricane Katrina shut down oil and gas production in the Outer Continental Shelf in the Gulf of Mexico, the source for 25% of U.S. crude oil production." (FTC, 2005) The damaging winds, flooding, and damage to the United States refineries caused by Hurricane Katrina caused gas prices to soar after the storm. With supply, still down after Hurricane Katrina, refining capacity worldwide has not expanded to meet demand, and some oil fields and oilrigs are supplying less oil. The soaring gasoline prices were a result in the decrease of our supplies interrupted and halted from the devastation of Hurricane Katrina. "Worldwide supply, demand, and competition