The Social Economic Implications of a Gasoline Crisis

The Social Economic Implications of a Gasoline Crisis Free Online Research Papers Background Gasoline has been around for ages and is the driving force for much of the world. Gasoline is a mixture of hydrocarbons, although some contain significant quantities of ethanol. In its early days, gasoline was used as a cleaning agent and also as a treatment for lice. Gas became really important once the world started to get into the automobile and aviation period. Some of the first uses of gasoline in automobiles originated during the wars of the early 1900’s and is used everywhere in today’s age. Purpose The purpose of this report is to talk about the economic and social problems that are arising from the recent spike in gasoline prices. Also, it discusses what people can do to help fight against the continual rise in the cost of fuel. Methodology The internet is a tremendous source to use to gather information on a topic, and it proved extremely helpful in obtaining ideas on the problem being discussed in this report. The New York Times online, Wikipedia, Fox News online, and other databases were used to find out valuable information on the topic at hand. Significance Since gasoline is the driving force of the world, it is extremely important to keep and maintain the price of fuel at a reasonable level so that people can afford to drive their automobiles. II. Rising Gasoline Prices The number one reason for the sudden spike in gasoline prices can be easily contributed to the supply and demand curve. The demand for gasoline is up more than ever now, while the supply from the major companies in OPEC is not. According to some sources, the non OPEC countries’ supply of crude oil is dwindling, which is bad for the prices because they are not producing very much oil. This leads to a near monopoly in the oil production factor. Cheap oil, which runs around $60/barrel, may be gone. This summer the average price of a barrel of oil was around $120/barrel. This is a giant leap, a 200% increase, but it really isn’t as bad as it seems. A $120 barrel of oil is still a smaller fraction of the GDP than it was in the 1980’s. Even though many think that this price will shut down the entire world with their energy usage, they are in essence wrong. A major problem with the continual rise in fuel prices is its effect on the average American. The rising cost is putting a drain on a family’s money that could be used for entertainment. Most families live in more rural areas in the suburbs and have to drive a significant distance to travel to work. These long drives put a large drain on their gas tanks. This causes them to spend twice as much as it used to just to travel to work. This may not be as big of a problem as it seems, but these same parents are not getting a raise from work to make up for this deficit. They are not able to do they things as a family that they used to. Another factor that arises from the higher gas prices is the larger cost for the farmers to harvest their crops. A lot of people would not even think about this. They don’t look to the farmers as the producer of all of the items at the grocery store. The cost of fuel is a major factor in how much profit the farmer will make off of the crops that he or she raises. The farmer spends so much money to run their tractors, combines, semis, and trucks. A farmer that was recently interviewed stated that it was going to cost him over $20,000 more this fall to harvest his crops than it did the year before. The higher cost to harvest the crops leads to a direct impact on the cost of the products at the store. Companies have to pay more now to get the same amount of produce that they received originally. Not only does the produce cost more, but the cost of transporting theses goods is rising too. This leads to a direct price hike on the goods at the store. People wonder why they are paying more to go to the grocery than before and don’t understand it. They don’t see that the rise in fuel prices is accountable for a majority of the price increase. This leads to even more spending on families to provide the same food for them to eat. People are spending more money and not getting any more out of it. Not only do the rising gas prices put a damper on families, but it also hurts all transportation in general. Schools also have to spend more money just to drive their buses to pick up students from home, drive to athletic events, and also academic events. High gas prices hurt public transportation as well. They have to spend more to fill up their tanks just like everyone else. For them to keep making their same profits they have to raise the price of fares for citizens to travel with them. A person just can not expect to get the same services as before for the same price when the companies have to pay higher prices for fuel. If they were to do this, they would lose a significant amount of money. This in effect can lead them to going bankrupt after an extended amount of time. The same thing can be said about the airline industry and also tourist attractions. Their costs to operate continue to grow leading them to charge more for a plane ticket to help cover the costs. This then leads to people wanting to not travel as much, which in effect makes those companies lose the revenue that they are used to getting. With the loss of people traveling, the companies have to lay off more people all of the time to try and keep their profits up. II. Lowering Gas Prices There is some hope in sight for everyone. In the couple of months leading up to the election the gas prices have fallen significantly. This is a great relief to many people around the world. Lowering gas prices is a savior to many people. This will ultimately lead to folks having more money in their wallets. In the world today, this is a great thing with the credit crisis going on. So many homes have been foreclosed on due to financial means. This probably isn’t a solution to the problem, but it is a great start. Having more money will allow people to pay off these bills instead of not paying anything at all. The biggest help would be to lower income families and to small family-owned farms. These groups are the people just barely getting by as it is. With the increase in the gas prices it was putting an even larger strain on their already low incomes. Now they are taking a sigh of relief, at least for now. This lower fuel costs will possibly keep them afloat long enough until the government can get the prices under control. III. Who Is At Risk The bad thing about this dilemma is that it affects almost everyone in the world who uses an automobile for anything. Even if you do not use a car or truck for anything it will affect you in same way or another. Any person who drives a car is affected by the soaring gas prices. Whether you drive a long distance or just to the library. It is costing more and more to drive a vehicle. It is affecting many students here at Morehead State University too. Since this campus is like a suitcase college, students packing up and leaving every weekend to go home, it is putting a pinch on their pocketbooks as well. This in effect can actually be better for the campus and surrounding restaurants. With more kids staying around, it leads to them having more business on the weekends. Students will more than likely go out to these companies rather than sitting in their dorms all weekend. The rising gas prices can actually have a good effect on larger cities and metropolitan areas. If less people are out there driving, it will reduce traffic. This is a good thing resulting from the dilemma. With less traffic there is going to be a better chance of having fewer wrecks. Another benefit to less cars being on the road is pollution. There will be less exhaust fumes going up into the atmosphere. This is a great thing for the environment. IV. Conclusion The rising cost of gasoline is a major concern for the US and the World. Recent hikes in the cost of crude oil are having a tremendous impact on everyone. The group that is most vulnerable according to some is the farming industry. Everything that a farmer does with his farm has some use of gasoline involved, whether it is filling up their family cars or to filling their tractors and combines with diesel fuel. Diesel fuel costs around one dollar more per gallon than regular gasoline. People don’t think about all of the factors in the farm that involves gas and diesel fuel. If they are paying more to harvest their crop, then they will have to get more in return on their crops. This leads to a trickle effect onto all of the goods one will buy at the grocery store. As long as the prices stay high then it will be harder and harder for people to live in their comfortable bubble that they are used to living in. Gas prices do not affect only a small portion of society; it affects all. V. Recommendation The hike in gasoline prices has made many think of ways to reduce the impact of the problem. Here is a list of things that are currently happening to help fight the fuel price dilemma. 1. Hybrid cars are being produced and sold now more than ever before. A hybrid car is a basic car that has two different engines. It has the normal gasoline engine and also an electric motor. The hybrid car will run off of the electric motor as long as it is charged. Once the battery runs out it automatically switches over to the gas engine. A good thing about this is that once the gas engine takes over, it begins to charge the electric motor back to running capacity. A bad side to the hybrid car is that it costs significantly more than the average gas powered car, nearly double the price in some instances. It is not the best solution to the problem, but it is a start. 2. Another solution to the rising gas prices is more fuel efficient cars. Most of the big auto makers offer a car that can get 35-40 mpg. The problem with this is that most of these cars are a lot smaller and do not have the large capacity that the SUV owners are accustomed to. 3. A third solution is bio fuels. These are a whole different type of fuel. These include bio-diesel, hydrogen, and vegetable oil. A good thing about these fuels is that they are cheaper to run and also help the environment. They burn much cleaner than a normal gas powered car or truck. BIBLIOGRAPHY Alternative Fuel. Wikipedia. 16 Dec. 2006. 18 Nov. 2008 http://en.wikipedia.org/wiki/Alternative_fuel Ashton, Peter K. (2007). The method behind endless gasoline price spikes. Nieman Watchdog. niemanwatchdog.org/index.cfm?fuseaction=background.viewbackgroundid=187 Dunn, Phillip. Hybrid CarsPros and Cons. Physorg. 19 Jan. 2006. 16 Nov. 2008 physorg.com/news10031.html. Krauss, Clifford. (2008). Rural US Takes Worse Hit as Gas Tops $4 Average. The New York Times Online. nytimes.com/2008/06/09/business/09gas.html?_r=1scp=15sq=gasoline%20crisisst=nyt Lawinski, Jennifer. OPEC Cuts Oil Production in Move to Boost Prices. FoxNews. 24 Oct. 2008. 15 Nov. 2008 . McKay, Steve. High Fuel Prices Effects on Farming. Telephone interview. 10 Oct. 2008. Why Are Gas Prices So High ? ZFacts. 3 Dec. 2007. 15 Nov. 2008