Question

Demand and Supply Analysis

A‌‍‍‌‌‍‌‌‌‌‌‍‍‍‌‌‌‌‍fter Hurricane Katrina in 2005, the price of gasoline increased because of extensive damage to refineries on the Gulf Coast. How would an economist use supply-and-demand analysis to explain the increase in the price of gasoline in the United States right after Hurricane Katrina? And in the 2008 presidential campaign in the United States a major debate was the high price of gasoline and crude oil. The price of crude oil rose rapidly in 2007 and 2008, despite increases in production by Organization of Petroleum Exporting Countries (OPEC). Part of the reason is that the Chinese and Indian economies had been growing at very high rates. This growth has fueled demand for energy for industry and transportation. In addition, the rising incomes in these countries have increased the demand for automobiles and thus gasoline a‌‍‍‌‌‍‌‌‌‌‌‍‍‍‌‌‌‌‍s more people in these countries can afford them.

Expert Solution

The rising oil price in the US due to Hurricane Katrina and the surge of crude oil prices in 2008 can be linked to supply and demand dynamics witnessing disruptions in the supply chain following Katrina and the economic boom in China and India feeding demand for energy becoming further evidence for global influences over energy markets.

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