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Supply & Demand Project

Mariah edit Master subtitle style Click toStewart Aviles 1st 2/24/12

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Why are gas prices rising?

Two reasons contributing to rise in gas prices are increased demand and increasing cost of oil due to investing in the commodity.

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Increased Demand
Demand

for oil grows as countries develop and populations grow. Worldwide increase in demand for oil is especially due to a boom in per capita income in the two most populous countries in the world, India and China which

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Increased Demand continued


As

they develop and their per capita income grows, more people are buying cars as well as using more resources than they would have previously been able to afford. Although the per capita energy use in India and China is not even close to that of Europe and North America, it is sure to rise in the future with further economic growth. The current 4/30/12 and future surging demand in these

Commoditites Speculation
The

other contributor to the price of gas is commodity traders who buy and sell future contracts on materials and resources such as oil. Commodity traders make a profit by buying a contract and then setting a higher

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Speculators continued
Fears

about political unrest, natural disasters, and economic patterns all tend to have the greatest effect on traders predictions. If the speculator foresees any increased demand or decreased supply, they will jack up their prices. Even without fluctuation of supply and demand, commodities traders are driving up the price of oil by investing money that was once 4/30/12 invested in real estate or the stock

Some Background Info


A

commodity is any resource, material, or raw product (used to make other products) that is traded. They are bought and sold buy businesses that need them to operate or by

Commodities are traded on futures contracts which are deals that dictate the amount of the commodity, its predicted future price, and a 4/30/12 date at specific

More Background Info


Index

speculators are the people who predict these future prices and thus set the price for the commodity. These are investors that arent

THESE THINGS ARE IMPORTANT BECAUSE They threaten the markets inherit nature by trading with no regard for supply and demand which reverses the method by which prices are set. To make money, the speculators usually bet on increases which immediately raise the commoditys price. Also these speculators are merely placing bets based on prediction and have no interest in the actual buying and selling of the commodity, and in the case of oil, theyre making a lot of money by influencing the futures market. Speculators cause producers to horde theyre product so they can sell it later at a higher price which decreases supply available to consumers when, in fact, the supply is there. Speculators are at fault for creating an artificial market independent from supply and demand influence but completely reliant on the prices set by the people who make more money the 4/30/12 higher it is.

What do we do now?
In recent years, the Government has implemented new regulatory laws in stands for Corporate order to is a bill, passed in dependence the Average decrease CAFEEconomy which is on oil. The Energy Policy Act Fuel required
2005, that was intended to promote alternative energy development with tax incentives. It rewards consumers for making energy conserving purchases, for example, giving tax breaks to those who make energy-efficient improvements to their homes. In the case of the car industry, the act replaces the clean-fuel burning deduction with a tax credit, a deduction from total amount of federal tax owed, for owners of hybrid vehicles. The Energy Policy Act also increased the percentage of bio fuel (ethanol) that must be mixed in gasoline sold in the U.S.

average fuel economy for a manufacturers entire fleet of passenger cars and light trucks for each model year. If a manufacturer fails to meet that standard they are required to pay a Gas Guzzler tax which is intended to discourage production and subsequent purchase of fuel inefficient vehicles. CAFE provides incentives in the form of credits to any manufacturer whose fleets average fuel economy for a particular model year exceeds the standard. Earned credits can be used by manufacturers to offset previous 4/30/12 shortcomings.

How we have adjusted


In

my family, as with many other American families, we are cutting back on gas usage and everything else we spend money on. My mom got a hybrid car last year and I try to carpool almost everywhere. Also havent been on vacation since 2009, thats a long time!
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An Alternative: Ethanol
Ethanol is an alcohol that can be stripped of its water The ethanol making process starts with the content and fermentation of any starchy plant (one that contains carbohydrates). The plant ishighly into stripped three parts: lignin, cellulose, and hemicelluloses. concentrated The cellulose or starch is then converted to sugar (until it is and sugar is fermented by microorganisms (yeast)not feeding on it. The byproducts of this fermentation potable) and 4/30/12 process are ethanol and CO, the ethanol isas fuel. used then
With the soaring prices of gasoline, society is getting more and more interested in an alternative fuel. One of these alternative is bio-fuel or ethanol.

Switching to Ethanol
Converting to ethanol as fuel as many drawbacks for the consumer as well as manufacturer, the first being that ethanol content in gasoline reduces a cars fuel economy by 20% because it isnt as efficient as pure gasoline. To make a vehicle E85 capable, manufacturers must modify the original models engines which costs them anywhere from $100-$150. Consumers are not charged any more
In

recent years car manufacturers have increased the number of Flex Fuel vehicles they manufacture. These vehicles, including E85 4/30/12 vehicles are

Sources of Ethanol: Corn


Ethanol

can be produced from any plant containing starch. Americas current favorite source of ethanol is corn. For every one unit of fossil fuel used to produce corn ethanol, 1.3 units

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Sources of Ethanol: Sugarcane


Another

popular source of ethanol is sugarcane. Unlike corn, sugarcane doesnt need to be broken down to get any sugar out of it and it yields more than twice as much ethanol per acre as corn. Brazil grows a ton of sugar cane andFor everyleadingof is the one unit fossil fuel energy producer of sugarcane ethanol. necessary to produce
sugarcane ethanol, 8 units are produced, and running 4/30/12 on sugarcane

Sources of Ethanol: Cellulosic

third source for ethanol production that doesnt cut into food supplies is plant byproducts. These are stalks, grass, leaves, cornstalks, switchgrass, wood, sawdust, etc. Although not yet produced commercially, 4/30/12 cellulosic

When corn is used for ethanol


About 25% of the items in a typical grocery store contain corn in the form of corn syrup, corn starch, corn flour, corn meal, and ground corn cobs. As we use more of our corn supply for fuel, less supply is available for food production, and prices will skyrocket.

In Mexico, the price of corn tortillas, a major staple in their average citizens diet, has doubled in the past year. Even the production of chicken meat and eggs is going to feel the effects of smaller corn supply. Poultry feed is about two4/30/12 thirds corn and chicken and egg prices have

Is corn the answer?


NO. Corn ethanol is not the answer to worldwide energy But neither is concerns. Corn is sugarcane the answer already mass either! With sugarcane in produced and Brazil, it is basically the heavily subsidized same story. Also, the more popular sugarcane in the U.S. but this ethanol production is, the SO I see cellulosic ethanol as thedeforestation more answer to this is because we question. It requires very little fossil fuel energy to already use it are no industries competing for in so occurs so the produce and there environmental upsides 4/30/12 its supply! By using plant byproducts, less much stuff. Shifting