Library - Cengage
Introduction: This story describes the market for gasoline in 2001. After you have reviewed it, draw a graph to explain why the price per gallon rose during this period. Pay special attention to the comment about elasticity. Which curve does it describe, and what does it tell you about the shape of that curve?
ANNOUNCER
From ABC News, this is NIGHTLINE. Substituting for Ted Koppel and
reporting from Washington, Chris Bury.
CHRIS BURY
Perhaps it's human nature to look for something or someone to blame
when things aren't going well. Certainly, it's convenient. Consider
the cost of gasoline. No sooner did it creep towards $2 a gallon
than charges of price gouging began. And big oil, always a favorite
boogieman, fed right into the blame game. The nation's biggest oil
company, ExxonMobil, just posted the most profitable year in the
history of any corporation in the world, ever. So it's easy to cast
big oil as the villain. Too easy. In fact, there's plenty of blame
to go around. Take the gas-guzzling SUVs, minivans and pickups
Americans so love to drive. They now make up more than 40 percent of
all cars on the road. Whose fault is that? Then there are the
quirks of individual states. Oregon, for example, still doesn't
allow self-service stations. Illinois demands a certain percentage of
a corn product, ethanol, in its gas.
Tomorrow, when President Bush unveils his new energy plan, he is
expected to warn Americans that this country faces the most serious
energy shortage since the oil embargo of the 1970s. So on the eve of
that announcement, we thought we'd ask a simple question. Why are
gas prices so high? As NIGHTLINE correspondent Dave Marash reports,
the answer is not so simple.
3RD MAN
Gas prices are way too high. It's like 2.31 here, and it's
just--it's ridiculous.
2ND WOMAN
Every time there is a crisis with these gas companies or whatever,
we're--it's coming out of our pockets.
DAVE MARASH, ABC NEWS
(VO) It's the talk of the nation.
4TH MAN
This car here eats up a lot of gas. And I'm at the pump like at
least twice a week or maybe even three.
3RD WOMAN
I used to drive another car that cost me more to fill up, than this
time, but actually I got pretty lucky this time.
DAVE MARASH
(VO) A recent poll identified energy and the prices being paid for it
as the number one issue facing Americans today.
1ST MAN
The portion of our income that we've devote to gasoline, which used
to be kind of, you know, minimal and--and--and--and somewhat
frivolous, now seems to be significant.
DAVE MARASH
(VO) The latest figures on the average cost of a gallon of regular
across America today is $1.71, that's up 13 cents from just a month
ago, and 21 cents a gallon higher than the same gas cost a year ago
at this time. How come, you ask?
TOM KLOZA
Well, it is a simple supply and demand issue. But basically,
you're--you're looking at a product which has been adding 2 or 3 or 4
percent demand every year, and we haven't built any refineries in 25
or 26 years.
DAVE MARASH
(VO) Back in the 1970s when gas lines and shortages were common,
Americans cut back on their gasoline usage, and for almost two
decades, America had excess refining capacity. But in recent years,
lower prices and steady supplies brought back a generation of gas
guzzlers, especially those popular SUVs and minivans. These vehicles
have consistently pulled down the nation's fuel efficiency. Now,
with increased demand for gas, refineries are running at almost full
capacity, and they can get more for their product.
GEOFF SUNDSTROM
In the short term, there's very little elasticity of demand for
gasoline. Most of us have determined where we're going to live.
We've determined what car we're going to drive. We've determined
what activities we'll have our kids involved in after school. And so
the need to purchase gasoline and drive nationwide basis, we'll probably peak at around $1.75 a gallon
or so. I think that will happen probably in the next few weeks and
that prices will hang on there, perhaps plateau, but will be sharply
lower and come down sharply in the fall and the early winter. These
numbers are not sustainable.
DAVE MARASH
In the meantime, the AAA estimates that a year of regular gas
averaging a buck seventy a gallon would cost the average American
driver an extra $800. I'm Dave Marash for NIGHTLINE in New York.
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