Gasoline for $1 a gallon?

Gas at $1 a Possibility for Parts of the U.S. 
by: Alison Sider
Feb 09, 2016
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Oil Markets, Supply and Demand

SUMMARY: Gasoline could return to $1 a gallon for the first time since the 1990s amid the continuing decline in crude-oil prices, a growing fuel glut and seasonal refining shifts.

CLASSROOM APPLICATION: Students can evaluate the causes of low gasoline prices, the effect of falling gasoline prices on the quantity of gasoline demanded, and the reasons why gasoline prices vary across the states.

QUESTIONS: 
1. (Advanced) What factors are causing gasoline prices to fall? Include OPEC, refinery capacity, and the performance of the Chinese economy in the explanation.

2. (Advanced) How do state taxes, distance to refineries, and state environmental regulations affect local gasoline prices? Why is Texas a good candidate for ultracheap gasoline?

3. (Introductory) What is the effect of the price of gasoline on the equilibrium quantity of gasoline demanded? Does a decrease in the price of gasoline cause a shift in the demand for gasoline?

Reviewed By: James Dearden, Lehigh University