Rising Oil Prices lead to Higher Gas Prices

During August of 2016, oil prices rose by three dollars, which caused the gas prices in southern states like Florida, Georgia, and Tennessee to increase by three to four cents per gallon. This was the first time gas prices rose in Florida in 62 days. Oil prices rose because the amount of crude oil supplied decreased in the second half of 2016. While there has been an overall decline in prices over the past two years, this was still a shock to see an overall increase of six cents in gasoline. In terms of supply and demand, this shock would cause of a shift in the supply curve. The curve would shift to the left because the quantity supplied decreased, which would lead to a larger equilibrium price. According to spokesman Mark Jenkins of The Auto Club group, “Gas price are likely to remain volatile through the rest of the month, but stay low through the rest of the year.” Luckily, gas prices have been and still will be in an overall decline.


1 Comment »

  1. Nicky Tynan Said,

    November 2, 2016 @ 4:00 pm

    Very good analysis of a shock to the supply curve and the impact on prices.

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