Category: Gas Prices

Analysis of Australian Gas Price Changes Over the Past Ten Years in the Context of Supply and Demand Theory

Economics is regarded as the social science that is concerned with the distribution, production as well as usage of goods and services. In economics, demand and supply are those factors that are said to decide price, producers would like to sell at a specific price i.e. supply, and customers will be able to buy the product by determining the price of the particular commodity. Supply refers according to the varying amount of commodities that producers will supply at various costs i.e. a more price yields a more noteworthy supply. Whereas, demand refers to the quantity of good that is demanded by consumers according to their price. As indicated by the law of demand, there is inverse relationship between demand and price as the demand increases when price decreases. However, according to law of supply, there is positive relationship between price and supply, whenever price increases the supply automatically starts to rise.

‘P’ denotes to Price and ‘Q’ denotes the Quantity of the product. The upward curve indicates the supply (S) and downward curve indicates the demand (D). The demand curve always shifts in a downward trend while the supply side goes in an upward trend. Surplus is the situation where the quantity supplied is greater than the quantity demanded.

Energy consumption supports all parts of current society. Late supply interruptions and cost increments have focused on a production which is frequently underestimated. Australia’s vitality framework is more difficult and various now than at any past time in mankind’s history. The vitality area in Australia makes a significant commitment to the country’s total national output, export earnings and work. A safe supply of reasonable, dependable and ecologically practical vitality is basic to Australia’s future monetary development and success. Australia has a wealth and assorted variety of energy resources that supports domestic utilization and substantial fossil fuel energy trades far and wide. Australia keeps on having the world’s biggest known financial uranium resources, the fourth biggest coal (dark and darker) assets and generous traditional and whimsical gas assets. There is great potential for further development of the non-inexhaustible asset base through new revelations. Recognized assets of crude oil, condensate and liquefied petroleum gas are progressively restricted and Australia is progressively dependent on imports for transport fuels. Australia additionally has plentiful and broadly conveyed breeze, sunlight based, geothermal, wave and tidal assets. Hydro energy resources have been broadly created, and wind, sunlight based and bio energy resources are progressively being misused for power age. Advances in renewable energy generation and storage technologies and better mapping of resource potential will be important for continued uptake, and so will technologies and policies for grid integration, sunlight based high temp water has bit by bit expanded, the other sustainable power source assets remain to a great extent undiscovered for power age. The usage of sustainable power source will keep on expanding altogether to around 2020, reflecting government arrangements (for example the Renewable Energy Target) and falling installing costs. Advances in renewable energy generation and storage technologies and better mapping of resource potential will be significant for proceeded with take-up and innovations and arrangements for grid integration. Geosciences Australia and the Economics Branch of the Department of the Environment and Energy, with help from the Australian Renewable Energy Agency, have created this incorporated logical and financial appraisal of Australia’s non-renewable and renewable power resources. This production gives a preview so as to empower a correlation crosswise over vitality assets. This arrival of the Australian Energy Resource Assessment (AERA) is the first to be distributed in a web conveyed group. This new arrangement offers upgraded usefulness and simpler route. This change from print to computerized production is a piece of the progressing advancement of AERA to guarantee it keeps on giving important data to partners.

There are three main components of typical energy that affects price rise in Australia:

1. Wholesale cost: it covers electricity being generated or extraction of gas.
2. Network charges: paying for the consistent delivery of energy by the power lines or gas pipelines.
3. Retail margin: paying for meter reading and other services.

The relationship between energy use and economic output can be described in terms of the energy intensity, or inversely, the energy productivity, of the Australian economy. Energy intensity measures the amount of energy used to produce a unit of economic output (energy consumption/GDP), while energy productivity estimates the amount of economic output produced per unit of energy input (GDP/energy consumption).

The rate of price increments for gas is relied upon to direct in many states and regions throughout the following couple of years after a time of critical incline. The government can straightforwardly impact just a little piece of value results. Intergovernmental understandings and activity by state and territory governments are the most significant arrangement switches to check future cost increments. Gasoline Prices in Australia increased to 0.98 USD/Liter in July from 0.97 USD/Liter in June of 2019. Gasoline Prices in Australia averaged 1.01 USD/Liter from 1998 until 2019, reaching an all-time high of 1.67 USD/Liter in March of 2013 and a record low of 0.46 USD/Liter in December of 1998.

The given figure depicts the price of gas in Australia ranges from 2008 to 2019 time period. We can clearly see that the price of gas in 2008 was almost 0.6 USD/liter that increased dramatically to 2013 (1.4 USD/liter) because the demand for gas was high in this year and then reached to the peak experiencing 1.67 USD/liter in between 2012 to 2014. Then after, the price of gas started decreasing as the demand decreased in a fluctuating trend till 2016 at 0.46 USD/liter (least price) during the given time period. The current price of gas is 0.98 USD/liter. There is an absence of supply and generation which have antagonistically influenced the estimating list of the gas because the price of gas is inclining quickly year by year. Australia is the nation that has probably the big industries which is generating gas absolutely from its own resources. The administration of Australia has taken the inception in their very own hands on the most proficient method to decrease the costs of the gas and satisfy the need of the individuals with the suitable supply.

According to the media report 2018, they are saying that price of gas in Australia has been the severe problem due to the many households especially in South Australia. They are arguing over ‘Does South Australia have the highest energy prices’ in the nation and ‘the minimum reliable grid?’.

There are three major components of a typical energy bill wholesale costs (covering electricity being generated or gas being extracted); network charges (paying for the reliable delivery of energy via power lines or gas pipelines); and a retail margin (paying for meter reading and other services).

Overall, energy has a noteworthy impact in Australians’ lives, with two family units and organizations depending on different sorts of energy for warming, cooling, cooking, transport and machinery activity. Development in Australia’s economy has prompted increments in vitality use, especially in extending ventures, for example, the mining business. Other variables, including a growing population, and the resulting increment in the quantity of family units requiring force and warming, have additionally added to this expansion. Australian Government intervention to straightforwardly influence price outcome is to a great extent limited to the effect of the carbon cost just as other renewable energy and vitality proficiency measures. Changes to energy prices from correcting these measures which would require administrative activity should course through, somewhat, to end clients. Australian Government activity can also be aimed at achieving intergovernmental participation to change administrative results and impact government-owned energy suppliers. One current policy discussion is about the benefits of a gas reservation approach to address value issues that are related with LNG exports on the east coast. There are various intergovernmental forms, especially through the Council of Australian Governments and the two key controllers, the Australian Energy Market Commission and Australian Energy Regulator. They have to address a portion of these difficulties. In any case, it stays to be seen whether they will be viable in containing increase of price in the medium term.

References

1. https://www.abc.net.au/news/2016-08-01/gas-prices-higher-in-australia-than-in-export-destinations/7680106
2. https://www.onebigswitch.com.au/campaigns/obsau-1908-energy-resi-origin-qld/energy_plans/query?utm_source=google&utm_medium=cpc&utm_campaign=Origin_July_1st_QLD&utm_term=%2Bgas%20%2Bprices&gclid=Cj0KCQjwy97qBRDoARIsAITONTIocTWTW7dn7ni-S2_dzocOq7EmVw_xPzNnnq8K_OL1C9JAi6O3WVMaAuz9EALw_wcB
3. https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/specialization-and-exchange
4. https://aera.ga.gov.au/
5. https://www.energy.gov.au/sites/default/files/gas-price-trends-review-report-revision2-mar-2017_pdf_5913_kb.pdf

Relationship between Fuel Prices and the Cost of Living: Newspaper Article Analysis

Summary

According to an article published on the 23 May 2019 on a website called ‘Moneyweb’, it was stated that fuel prices took majority blame for the increase in the cost of living. The article speaks about how the fuels prices have had an effect on transporting, goods and services as well as many other aspects in different industries. Statistics have been collected from ‘Stats SA’ or commonly known as Statistics SA’s Consumer Price Index (CPI).

Analysis

In April 2019, the inflation rate was 4.4% which was stable. However, since the 12% increase in fuel prices, aspects such as transport have resulted in an increase of 7.4%. This was an increase in the cost of transporting. This then affects the prices of goods and services that require transportation. This plays a huge role in the inflation rate because certain business require transportation to deliver their products to a retailer to be sold to a consumer.

According to Stats SA, CPI prices on admissions, such as gas prices, increased by 8.3% since last year. The article states that if administration prices were avoided the CPI would’ve only increased by 3.7% which could’ve been a massive deal for consumers. Not only have administration prices increased but also the price of cooldrinks. The price increased by 9.4% over the past year because of the new rates on the cost of transportation. Companies such as Coca-Cola, transport 600 cases, which contains 24 bottles each. Since the amount being transported is high the selling price would also be high for the consumer. This also takes the sugar tax into consideration.

However, petrol stations try their best to lower their prices on goods to gain competitive advantage. To do so, the different petrol stations come up with growth strategies. For example, garages such as Shell and Engen who share a joint venture with steers would introduce a ‘Wacky Wednesday’ deal where you can buy two burgers and get the other free.

Since there’s been a 9.4% increase in cooldrinks and sugar tax has also increased most garages have been promotions into place. Shell has 3 promotional deals. The first promotion includes a Nestle chocolate bar, Pringles and the consumers choice of either a 5ooml Coke or 750ml Bonaqua pump for only R19.90. This not only gives consumers a choice but also a cheaper option. Shell also has many ‘open road essentials’ such as 2x cans of 330ml Liqui Fruit for the price of R19.90. Shell currently sells petrol 95 ULP for 34.8 cents a liter and diesel 71.25 cents per liter. Although these prices are high-priced, Shell has put reward programs in place.

Consumers get the option to either get their price discounted using a Clicks Clubcard or Discovery insure. With the Clicks Clubcard, 10 cents per liter of fuel is equivalent to 50% of fuel spend back. Discovery insure gives back 50% of fuel spend for the number of points earned.

Conclusion

In conclusion, the people of South Africa are aware of how fuel prices have an effect on many others things that consumers or businesses buy on a daily basis. With an unemployment rate of 29% the cost of living affects those without jobs. They have no means of income and makes it hard for them to provide for themselves or their families.

References

1. Hilton Tarrant. (2018). Fuel Rewards Programmes Compared. Available: https://citizen.co.za/business/1973735/fuel-rewards-programmes-compared/ Last accessed 4 August 2019.
2. Bradley Prior. (2019). Petrol Prices Increase in South Africa. Available: https://mybroadband.co.za/news/motoring/314773-petrol-price-increase-for-south-africa.html Last accessed 4 August 2019.
3. Shell. (2019). Petrol Price Update. Available: https://www.shell.co.za/motorists/shell-fuels/petrol-price.html Last accessed 4 August 2019.

Essay on Impact of High Gasoline Prices

Gasoline has been around for over a century and will continue to stay around for a while. It is used for almost any common motorized machine. Before this gasoline product was patented in Massachusetts back in the 18th century, its very close relatives kerosene and petroleum were commonly used. Currently in today’s pandemic gasoline prices have been cheaper and dropping due to a couple of factors that will be discussed in this paper.

The different market structures play a big part in the price and demand of gasoline. Many of the top gasoline producers have a relatively equal price per barrel of gasoline. Thus in the wholesale market, the market is perfectly competitive. Meaning that when one company raises or lowers gasoline prices then the other top competitors must follow suit. This gives gasoline that usual average price that we see every day.

With gasoline being inelastic too, the prices usually don’t get crazy high or crazy low because the demand will always be there unless drastic changes in the demand occur which can play a little factor in the price level. It is a little different from a retail perspective, though. If we are in a global pandemic, which we see right now, it makes demand go a little down because not many people are working and need gasoline, therefore the prices drop. Rather than prices dropping, when demand increased like when we had a big hurricane a couple of years back and everyone was stocking up on gas, the prices were higher than normal.

Not exclusively does an enormous circumstance influence the gas costs, but, a ton of things figure out what the costs will be on an ordinary day. The expense of crude oil is the central supporter of the general augmentation in retail gas costs since the start of 2009. Generally, a $10 increase in oil costs implies a quarter of a dollar increase in retail gas costs. Steep oil costs depend upon a couple of factors including generally speaking effortlessly and solicitation, steadfastness of the scattering association, the estimation of the U.S. dollar, and worth theory.

An article written by a Wiley author talked about how the United States devours more oil and refined items than most other countries on the planet. The interest in unrefined petroleum in China, India, and other creating nations, has ascended with their populaces, expanded exchange, developing inside and business sectors. Creating countries are relied upon to represent about a portion of the worldwide interest by 2015, up from 36 percent in 1996. Expanding requests prompt more significant expenses.

With the demand side briefly being talked about, more towards the supply side now. Some demand factor that can affect gasoline prices could be the season itself. In summer more people are out and driving which makes gasoline prices rise. Not only this but the price of gas also rises during the summer months because it is slightly harder to make gasoline, according to the Energy Information Administration. They also stated that in the first week of February the gas prices are at the usual lowest of the year and mostly get the highest during the week before memorial day.

Economic growth will also be a factor in the demand side of gasoline prices. When the economy is at a low usually people will have less money to spend but this has the least amount of effect because big corporations use a lot of gasoline to work their machines. During economic growth, most companies produce more goods, and this will in turn use more gasoline. The major oil companies will