Students tell me they like real world context for quiz questions. So, students of Env-Econ, here you go: Using the basic tools of supply and demand described here, predict the effect of a recession (decreased income for consumers) combined with increasing supplies on the price of natural gas in Ohio.
Read below the jump for the answer...
Natural-gas prices will drop to a seven-year low for Columbia Gas of Ohio customers next month.
The company's price will be 52 cents per 100 cubic feet of gas, before taxes and fees, down from 68 cents this month. This is the lowest price since October of 2002 when it was 62 cents.
"We've been on this long stretch of falling, falling, falling, and we don't know" how long it will last, said Columbia spokesman Ken Stammen.
A typical residential customer can expect an average bill of $24.47 in August, including taxes and fees. The figure is $6.38 lower than in August of last year.
The continuing drop in prices reflects a surplus of gas supplies, for a variety of reasons. Natural-gas consumption is down because of the economic downturn, and new sources of gas have come on line to boost existing supplies.
This is a dramatic contrast from last year at this time, when prices had just peaked and energy analysts warned of high costs during the winter. Once winter arrived, though, prices fell, along with the prices of many energy sources.
Slight rewrite:
The continuing drop in prices reflects
a surplus of gas supplies, for a variety of reasons.decreasing demand and increasing supply of natural gas. Natural-gas consumption is down because of the economic downturn, and new sources of gas have come on line to boost existing supplies.
Now I'm happy.
