Question

Explain how demand and supply influence gas prices

Should the government be involved in the market? explain (role of the government)

Answer 1

The prices of natural gases are the function of demand and supply in the market. The natural gas is the fuel that we are using mainly for the electricity generation and heating. It would having the limited short term alternatives, when it's demand reaches the peak period. There occurs variation in the supply or demand over that short period of time. So it result in big price changes. The prices themselves act for balancing the supply and demand.

The natural gas production, underground storage levels, net imports are the factors that effect the prices on the supply side. When the supply increases the price will tend to pull down. While supply decrease the prices will shoot up.

The economic conditions, petroleum prices, weather are the factors that effect the prices on the demand side. Higher demand results in higher prices and lower demand pulls down the prices.

The government will not having the major involvement in this market. The government having no role in the price regulation in the gas. When it happens so, there will not be an competition amoung companies and those companies start to go out of the business. Due to the low income economy would suffer ultimately. The government can increase the gasoline prices only through import duties, through various kinds of taxes and environment regulations. The government having the total control over the export and they control the gasoline prices in other countries by controlling the quantity of oil it permitted to be exported.