Market Dynamics always change the supply and demand ratios of products, goods, and services. In many cases, the industry and the manufacturing organizations are able to anticipate and plan for such fluctuations, and this helps them to manage the supply chain effectively. But in many cases, natural events, political upheavals that are totally unpredictable can occur, and these can severely impact the supply and demand ratios. This paper analyses the impact that Hurricane Katrina had on gasoline prices.
The article on the effect of gasoline prices due to Hurricane Katrina are given at:
Walter William (2005), ‘Supply, Demand and Gasoline Prices‘ Web.
Cavaney Red (2005), ‘Hurricane Katrina’s Effect On The Oil Industry,’
Healey James R. (2005),‘Storm worsens oil, gas problems‘ Web.
- Relevant points: The articles suggest that the shortage in gasoline is due to the disruptions caused by the Hurricane in the oil drilling and refining areas of the Gulf of America. The hurricane destroyed many oil rigs and oil refineries, and this abruptly cut off the production and distribution of gas from these regions. These regions provide about 25% of US gas supplies. Due to this, there was a shortage of gas, and this created a rise in gas prices.
- Shift in the Supply Curve or Demand Curve: There was a downward shift in the supply curve as the production of gas was cut off. Demand rise was marginal as people only attempted to drive around for supplies and food.
- Is the shift an increase or a decrease: The shift in the oil supply is decreased, and the curve has moved to the left? At the same time, the rising cost of gas has reduced the demand to lower than normal consumption. This was partly due to the fact that the government urged people not to drive without reason.
- Equilibrium Point: The supply and demand curves attain equilibrium in the left region of the curve and then gradually move back to their original point. This would happen in the initial days when there is a lot of panics, and people just want to stock up on gas, fearing it would run out. At this point, the supply has decreased, but the demand momentarily rises. When there is no obvious shortage of gas, and the government announces that it has resumed supply, people desist from stocking up.
Final equilibrium price higher or lower than the original price: The final equilibrium price would be higher than the original price, but this has nothing to do specifically with the hurricane. Analysts have been long forecasting the excessive consumption of gas and the gradual increase in oil prices forced by OPEC. There have been many forecasts that the rise in gas prices is due to the heavy consumption by US markets. But the curve for the price would attain equilibrium at the original prices, even though this may be momentary.
Final equilibrium quantity higher or lower than the original quantity: The final equilibrium quantity would be higher than the original, but again this has nothing to do with the hurricane. There has been a steady increase in the consumption of gas over the decrease.