Application of Supply and Demand Assignment.
In an article titled "Natural Gas prices rise as temps fall: Economy hit as consumers spend more on energy bills", published in USA Today, the author , Barbara Hagenbaugh, notes that the price of natural gas is up more than 130% from the preceding year. The cause of this increase is two fold. The first reason for the increase is the fact that it was colder this winter than last year, which leads to increased demand. The second reason for the price increase is the general strike of oil workers in Venezuela. This has produced a constant increase in price over the past few months. .
This increase affects the budget of over half the population in the United States. This price increase not only affects the personal budgets of the people, it directly translates into a negative effect upon the entire economy, if people are forced to spend more money on heating there homes, they will have less money to spend in other areas. .
This article is concerned with the shift in the supply and demand curves of the Natural Gas market, and is indirectly concerned with the demand curve of the crude oil market, and the rest of the economy as a whole. The information presented indicates that the demand curve for natural gas has shifted to the right, causing the price to increase.
The price has also been increased due to the decrease in the supply of oil a substitute for natural gas. The strike in Venezuela has decreased the amount of oil on the open market, causing the supply curve to be shifted to the left, thus indirectly increasing the cost of natural gas. The following diagram shows the result of the Supply and Demand Curves both shifting simultaneously. .
This graph explains the effects upon the market when both the supply and the demand curves are decreased. The shift to the right of the demand curve represented by the dark blue line labeled D1 and the light blue line labeled D2 indicates the increased want or need of natural gas, by the people participating in the market.
