Economics

             During this winter the price of natural gas has gone through the roof. This brings many questions to mind. Are the companies just raising prices? Is there actually a shortage that is causing the raise in price? It turns out that the market for natural gas is a very competitive one and that there is in fact a shortage in supply that is causing the price to increase.
             Natural gas must be drilled for and there are only a certain number of active companies that drill and they all have a set amount of capital. In the short run the supply of natural gas is very inelastic because they cannot just produce more gas. They would need to get more rigs and find more natural gas then drill for it. This would call for the need of more capital and capital gains are taken under consideration in the long run. The supply is less than the demand this winter natural gas companies have began to expand and look for more gas to drill for. This however takes time and eventually they will find more gas and will be able to produce more. In the long run the market for natural gas is more elastic because of the ability to get more gas and add to their capital. The shortage in supply of natural gas has caused for the need for more workers and capital like rigs and drills. The demand for workers and for drilling equipment and other things used in the production of natural gas have all increased because there is a lack of supply or a shortage.
             The demand this winter is much higher than it was last winter because the winter last year was much milder. This has caused an increase in the demand for natural gas. The supply however is fixed because they cannot produce more in the short run. The demand has risen and so has the quantity supplied however the supply cannot rise so the price increases. They simply cannot increase production to meet the demand this winter. There increase in demand has drained the inventory levels of th
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Economics. (1969, December 31). In MegaEssays.com. Retrieved 02:21, March 29, 2024, from https://www.megaessays.com/viewpaper/73325.html