Tuesday, June 30, 2020

Gasoline Is Cheap. Americans Can’t Take Advantage.

Inexpensive gasoline normally boosts the economy, but that benefit likely won’t be realized because of the pandemic

By Amrith Ramkumar of The WSJ.

This was from last March. It is a little strange to say  "Americans Can’t Take Advantage." The same thing that caused the prices to fall is what is keeping them home.

Demand fell because of pandemic. Then price falls. That is the end of the story. Price changing is not a shift factor for demand.

Now the article does mention that there was a supply glut. That increase in supply would lower price and, in the absence of any change in demand, would lead to an increase in quantity demanded (or increase in gas purchased).

Since less gas was purchased, it seems like the fall in demand outweighed the increase in supply (if it truly increased-what they call a glut just might be all the gas that firms expected to sell but could not because price fell).


"Demand for fuel around the world has plummeted because of travel restrictions and precautionary measures taken to contain the new coronavirus, which has sent markets into a tailspin and threatens to tip the world economy into a recession. At the same time, an expected glut of crude oil—due to a clash between Saudi Arabia and Russia over their share of energy markets—has amplified the decline in fuel prices."

"the average price of a gallon of regular gasoline in the U.S. has fallen to about $2.20 from $2.55 at the end of last year"

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