By now, you may have noticed that the gasoline price have reached an all time low. You may even try and fill up your car full of gas which is a very rare occurrence nowadays. However, before you celebrate, you may want to remember that the country is also affected by the world financial crisis that makes everything expensive.
So, just why is gasoline getting cheaper while everything else is getting more and more expensive? Well, there are basically a few factors that contribute to the price of gasoline. The first is the price of oil. As most people know, the price of oil is determined by supply and demand. Today, there is a surplus of oil supplies while there are limited demands for it. Even in the United States, the demand for gasoline is getting lower and lower each day.
Because of this, oil producers will need to lower the price of their oil in order for it to sell. With this, the gasoline (which is basically refined oil) will also be priced lower in order to entice people to buy gasoline. However, because we previously experienced a very high priced gasoline just a few months before, we tend to adapt to the system and prefer the money-saving system. So, people still continue on to practice saving money on gasoline, which means that the demand for gasoline is continuing to decline.
And, combine this with the world financial crisis, people tend to be shrewder when it comes to spending their money and filling their car with gasoline is not one that you may consider as a priority to spend money on.
Another reason why gasoline price is continuing to go down is because of credit problems of oil intermediaries. Oil companies use contractors in order to function properly. Contrary to what most people think, the company that ships oil to consuming countries is not owned by the oil company. The same goes for the refinery that converts oil to gasoline and other petroleum products. In short, credit woes that hit the supply chain of oil push the price of oil down.
The world financial crisis puts pressure on hedge funds. With investors unhappy about the performance hedge funds and who are liquidating their positions are starting to sell oil futures first. Why? Well, oil futures are considered to be the easiest to sell and they sell them early on before the price becomes any lower.
One reason why the oil reserves are very high is because oil companies anticipated that Asia, particularly China will keep on growing and demand more oil. This was halted because of the world financial crisis. Because oil companies anticipated a high demand for oil in the future, they stockpiled oil reserves by the millions in barrels.
As you can see, there are so many factors that affect the price of gasoline. So, is there a reason to celebrate the low price of gasoline? Well, you can be happy about it but it’s really not something that you should make a holiday out of. You need to remember that the world is in a financial crisis. It affects the basic commodities and you may just need to breathe easily that the price of gasoline is not rising along with the price of the basic commodities.
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