Supply and Demand of Gasoline Essay Example | Topics and Well Written Essays - 1250 words

Supply and Demand of Gasoline - Essay Example The gasoline price has ostensibly undergone extensive fluctuations mainly because of the product nature and the industry which supplies the world with oil. Note that a bulk of the aggregate oil output is produced by the Organization of Petroleum Exporting Countries (OPEC). This influential group is organized as a cartel and composed of nations in the Middle East including United Arab Emirates, Saudi Arabia and Kuwait among others. The main produce of these countries is oil and other petroleum products. Other countries, including the United States, are largely dependent on these countries for their oil supply (Case & Fair, 2002). With their rich oil resources, these nations created the cartel which has the ability to control member countries’ oil production capacity and output quotas of enabled them to collude to raise the oil price by. Given its mandate, supply of oil including gasoline is significantly affected by political unrest arising between these oil-exporting countries and other countries as well. To illustrate this point, supply of petroleum products was adversely affected by the war between Iran and Iraq in 1979. This tumultuous battle between two of the largest oil producers had caused a global oil supply shock and resulted in a dramatic increase in the price of oil. The limited oil supply then was further aggravated by the restricted means of transporting oil products to the rest of the world.