1. The fuel industry in California cannot run without gasoline as the main energy resource. The moment when refinery and pipeline mishaps raised the wholesale prices to their maximum, the gasoline stations could not operate their business properly. Most of the experts explain this sudden price increase with the power outage of the state’s 14 refineries which produce the state’s cleaner-burning gasoline for the local stations (White & Castellanos 2). In addition, there was also a fire at Chevron Corp.’s Richmond refinery, which led to the temporary fall of one more fuel production enterprise in the state (White & Castellanos 2).
2. In this exact case, the demand suffered significantly, and gas stations became the victims of the circumstances. In the result of the price increase, station owners were afraid to buy gasoline, as they were not sure whether they would be able to sell it. Many stations had to close their pumps when there was no fuel left (White & Castellanos 2). Those stations which bought gasoline had to sell it at the considerably increased prices and hope that customers would understand the situation.
3. The demand for gasoline in the short run is less elastic, as consumers have less time to adjust to the new price politics (Krugman 1). For instance, in the situation with gas prices in California, people faced the issue in a matter of one evening and had to deal with it somehow. Thus, consumers are less responsive to changes in gasoline prices.
4. The actions need to be taken on the governmental and local levels, including the following measures:
• a temporary moratorium on state gas taxes for a certain period of time;
• the use of alternative biofuels which do not depend on the large production enterprises;
• an increase of the gasoline storage for unexpected market tendencies;
• more than one gasoline supplier for each gas station.
Works Cited
Krugman, Paul. “Prices and gasoline demand.” The New York Times, http://krugman.blogs.nytimes.com/2008/05/09/prices-and-gasoline-demand/?_r=0. Accessed 26 January 2017.
White, Ronald D., and Dalina Castellanos. “Gas prices suddenly skyrocket in California.” Los Angeles Times, http://articles.latimes.com/2012/oct/05/business/la-fi-gas-prices-20121005. Accessed 26 January 2017.
