Article Analysis

Article Analysis
ECO/365
December 13, 2012
Dariush Ershadi

Article Analysis
Gasoline prices affect nearly every aspect of the economy. The price of crude oil, the cost of processing crude into refined gasoline, and government regulation and taxes all affect the price of gas at the pump. The article “California Struggles With High Gas Prices” published in the New York Times by Clifford Krauss chronicles a high gas price spike in California due to a recent drop in gasoline supply and relates that to gas prices nationally. This paper will discuss the utility derived from the product (gasoline), why there was a change in demand and market equilibrium prices assuming supply or demand stay the same and discuss the elasticity of the product.
The article details a 20 cent hike in gas prices during the month of October 2012. Within the article there is a note that prices have gone up despite crude oil prices easing somewhat since the beginning of the year. This easing in prices has happened despite factors that typically raise prices, such as turmoil in the Middle East and sanctions in Iran. Despite these, the world economy is slowing. There appears to be a surplus as a result from countries such as Iraq, Libya, Saudi Arabia and the United States (Krauss, 2012). This decrease in demand continues to drop the price of crude oil. With this said, gas prices have come down a total of three cents a gallon nationally (with the exception of California).  
Within the state of California, the price of gasoline is typically higher than the rest of the country due to tough environmental regulations and high taxes. When Exxon Mobil’s Torrance, California refinery was shut down on October 1, there was a loss of 150,000 barrels a day within the market. This, in addition to the fire at Chevron’s 245,000-barrel-a-day facility on August 5th caused a severe shortage only within the state of California (Krauss, 2012). Unfortunately, California is entirely dependent on fuel refined...