Ron 97 increase to RM 0.20?

http://thestar.com.my/news/story.asp?file=/2011/5/5/nation/8611879&sec=nation

PETALING JAYA: The price of premium petrol RON 97 will be increased by 20 sen to RM2.90 per litre today.

Malaysian Petrol Dealers Asso­ciation president Datuk Hashim Othman, who confirmed this, said the price hike would be effective at midnight May 5.

In the article, President Datuk Hashim Othman states that the global natural disaster and the political instability is the main reason to increase the price of the crude oil. For example, crude oil prices drop slightly after the death of the Osama bin laden. 

There are so many factors can affect the curve shift to left or right, one of the reason state is natural disaster, time factors, income affect, substitute affect and political instability but there are more factors that can easily affect the demand and supply curve. For example, change in the price of related goods, change in consumer expectations, changes in income, changes in buyer taste and more. The price petrol will increase 20 cent onwards but the demand and the supplier of the petrol will not decrease because petrol is a substitute goods. The substitute goods of the petrol are electric cars. When the price of the petrol decrease, consumer or supplier will not willing to produce or purchase transport.  

The table shows that a graph of the petrol market equilibrium following a natural disaster. This figure illustrates an automobile fuel market's adjustment to equilibrium following natural disasters. The vertical axis is price and the horizontal axis is quantity. S and D map the quantity supplied by producers and demanded by consumers, respectively, given the market price. Q₀ and P₀ are the equilibrium supply and price before the disaster. The supply schedule state “S₀ ” drops to “S₁”, because the price of petrol increase so don’t have any producer willing to produce transport to consumer. As cost of petrol are lower, more producer are able to produce more transport to market, and the consumer will willing to buy transportation rather than taking bus. When the cost of petrol increase, the demand of the cars will decrease, it’s a negative relationship.

As the cost of petrol increase, the sale of normal cars will drop but the sale of hybrids will increase. This is because hybrids with normal cars are substitute; when one is in high demand of hybrids the other products demand will drop. So its means, petrol has a direct relationship with hybrids where if the price of the product increase, quantity demanded will also increase. A hybrids car will not fall into the petrol complementary category because hybrids are a “green” car, it using energy sources to start the engine. Hybrids only using small amount of petrol to drive so when the price of petrol increase, more producer and supplier will see the earning so they will willing produce more hybrids to the market.  Increases of the petrol will cause more people willing to buy hybrids car rather than buy normal cars so it will cause waiting list in hybrids cars. A waiting list means that demand is too large to keep up with supply, therefore the equilibrium was not at its most efficient; there was a shortage. Supply is the product or services which producers are willing or able to sell to consumer. A shortage is caused when quantity demanded is greater than quantity supplied. If suppliers want to produce more products, price will have to increase because the price is controlled by government so there will be a shortage until the price adjusts. A shortage is usually short terms; the equilibrium is a state supply and demand must be balance. The graph below shows that the, petrol market, oil market. Hybrid market and car market

In graph one, as price of petrol increase, demand in the market of hybrids car will increase from A to B and there was no increasing in supply. It is difficult for producer to supply because the supply curve is inelastic; if the increase in supply is smaller than the increase in price then the price elasticity is described as inelastic. When it is inelastic; more people are willing and able to buy hybrids cars. In graph two, it show that the price of the petrol decrease, demand in the market of hybrids car will drop from B to A and there was increasing in supply, It is easy for producer to supply because the supply curve is elastic. When the graph is elastic, more and more people are not willing and able to buy hybrids cars. This is because the demand is more than the resources they need to use in produce the hybrid cars.

The increases of petrol affect people not willing to drive out and mostly they will choose carpooling with friends or take bus to work or study. Carpooling, also known as sharing vehicles with friends and it can save us money on petrol. As we know that in the article shows that the price of premium petrol RON 97 will be increased by 20 cent to RM2.90 per litre today onwards. The benefit of carpooling is more than drive out alone so the demand of car will decrease and people had no able to buy or sell. Hence, there may also have been increase in substitute modes of transport such as rail transport and buses. Finally people may travel long distance to work as a result of a general move to the suburbs. Maybe in the future, the price of the petrol decrease people are willing to drive out their own cars rather than choose to carpooling with others and yet supplier able to sell all the cars to consumer. So the demand curve will shift to left when the costs of the petrol increase just like the graph below.

In conclusion, there are negative and positive relationships in between petrol with other products. When the costs of petrol increase we will make changes to prevent spent more money in petrol. For examples, carpooling, hybrids and more.