Supply, Demand And Price Of Residential Heating Oil
Supply, Demand and Price of Residential Heating Oil
As the year goes on and heads into the colder parts of the winter season one concern of many consumers using heating oil to heat their homes this winter is whether there is adequate supply of the low inventories and what will it cost them. Typically heating oil prices fluctuate month to month with a norm of higher prices in the winter due to a higher demand of the supply. Within this paper to be discussed will be the demand, supply and cause of price fluctuation of residential heating oil.
The law of demand states that the price of a particular product is related to the amount of demand for the product. As the demand grows the price may seem to drop while if the demand decreases the price can increase. Changes in demand can be caused by a number of contributing factors. As our book states the events that can bring change to demand include, society’s income where a rise in income increases the demand for the goods, the price of goods in relation to the prices of related goods, tastes as a persons taste changes the demand can change without affecting the price, expectations with spending based upon future incomes or loss, taxes levied as an increased cost it thereby reduces demand while subsidies to consumers will show almost an opposite affect. (Colander, 2004)
The law of supply can be a little more involved than the demand process and takes into account the factors of production and resources that are needed to produce the product. While the book explains events that bring change to demand it also explains the events that can change the supply such as, price of input for the firm profit, technology changes that can cause a change in the production process thereby reducing cost and increasing supply, expectations of whether the price of a product will rise in the future, taxes as taxes increase the profits will decline and therefore reduce the supply and subsidies can show the opposite and reduce the cost...
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