essay on fuel prices
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Introduction
This essay will review how the rising fuel prices affect the different macroeconomic variables such as inflation, rising production cost, unequal economic conditions between oil exporting and oil importing nations. It will also examine the influence on airline industry, holiday companies, shipping industry and rising unemployment rates because of the higher energy prices. There will also be a review on car sales in India. This essay will also evaluate the rising demand for alternative energy sources. There will also be review about the effect of increasing fuel on agriculture sector and their influence on consumer behaviour.
The Impact Of Rising Fuel Prices On Business
The fuel prices are a significant determinant of worldwide economic performance. The oil price rise results in a transfer of income from oil importing to oil exporting countries according to a shift in terms of trade . Gas prices increase has an influence on oil price increase . When there is a higher oil price rise and the higher prices are maintained , it will have significant macroeconomic influence on economy. According to the net-oil exporting nations , a price rise increases their real national income due to the higher export earnings. The part of this earning will be offset by losses from lesser demand for exports because of the economic downturn suffered by trading partners. By contrast , the rise in fuel prices have negative impact on oil importing countries while these countries must produce goods and services.
As a result of this , oil importing countries needs more energy to run their local economy. The cost of production has risen because of the increase in fuel prices , and the producers of many products charge consumers a greater price. As a consequence, the inflation increases that makes life tougher for consumers around the globe. Moreover, it has devastating effect on emerging economies where the wages are flat and the spending is rising at a rapid pace . In this case, the gap between rich and poor is increasing. The poverty figures have increased for last 3 years . Emerging economies have insufficient funds to offer the entrepreneurs in the shape of subsidy due to this expanded gap. Therefore, it become advantageous to a entrepreneurs who run the manufacturing level of his country.
The increase in fuel prices has also devastating influence on Pakistan, Ethiopia. The higher cost of manufacturing will result in inflation. The producer will sell at greater prices when the income is not rising relative to the consumption the consumer would purchase small amount of goods, and the other stocks will change in to idle. As a result, the corporate sector will be worse-off. . Producers will sell the stock at lesser price again to cover the cost that result in deflation. Hence, it discourages investors and investment will decline.
Due to the past oil price shocks , the total macroeconomic damage occurred, the profits from the 1986 price decline to the economies of oil importing nations keep changing significantly. However, there were crucial impacts: economic growth declined significantly in most oil importing nations in the 2 years following the price increases of 1973-1974 and 1979-1980. Most of the big economic recessions in the United States , Europe and the Pacific since 1970's have been occurred before sudden rises in the price of crude oil even though other factors were important in some situations.(Terasa , 2008)
According to the UK National Statistics, UK factory gate prices increased at their highest rate for 9 months in November 2009 because of the higher fuel prices . Inflation accelerated from November to January because of the rising fuel prices , and increase in value added tax to 17.5% in February. Less productive capacity left more idle due to the recession than the Bank of England predicted which means that inflationary pressures might occur again quickly. The government reduce value added tax to 15% in December while short-term measure to increase spending . This is one of the monetary policy that the government conducted to increase demand and stimulate the economic growth. (Terasa , 2008)
According to the OPEC, the price will increase from $80 to $90 in the first quarter of 2010. In June 2009, US carried on borrowing excessively from China to pay for deficit spending and two US car manufacturers , GM and Chrysler, went bankrupt. Unemployment is increasing in US. As a result, US is trying to develop renewable local bio fuels to reduce their dependency on the fuel.
This essay will review how the rising fuel prices affect the different macroeconomic variables such as inflation, rising production cost, unequal economic conditions between oil exporting and oil importing nations. It will also examine the influence on airline industry, holiday companies, shipping industry and rising unemployment rates because of the higher energy prices. There will also be a review on car sales in India. This essay will also evaluate the rising demand for alternative energy sources. There will also be review about the effect of increasing fuel on agriculture sector and their influence on consumer behaviour.
The Impact Of Rising Fuel Prices On Business
The fuel prices are a significant determinant of worldwide economic performance. The oil price rise results in a transfer of income from oil importing to oil exporting countries according to a shift in terms of trade . Gas prices increase has an influence on oil price increase . When there is a higher oil price rise and the higher prices are maintained , it will have significant macroeconomic influence on economy. According to the net-oil exporting nations , a price rise increases their real national income due to the higher export earnings. The part of this earning will be offset by losses from lesser demand for exports because of the economic downturn suffered by trading partners. By contrast , the rise in fuel prices have negative impact on oil importing countries while these countries must produce goods and services.
As a result of this , oil importing countries needs more energy to run their local economy. The cost of production has risen because of the increase in fuel prices , and the producers of many products charge consumers a greater price. As a consequence, the inflation increases that makes life tougher for consumers around the globe. Moreover, it has devastating effect on emerging economies where the wages are flat and the spending is rising at a rapid pace . In this case, the gap between rich and poor is increasing. The poverty figures have increased for last 3 years . Emerging economies have insufficient funds to offer the entrepreneurs in the shape of subsidy due to this expanded gap. Therefore, it become advantageous to a entrepreneurs who run the manufacturing level of his country.
The increase in fuel prices has also devastating influence on Pakistan, Ethiopia. The higher cost of manufacturing will result in inflation. The producer will sell at greater prices when the income is not rising relative to the consumption the consumer would purchase small amount of goods, and the other stocks will change in to idle. As a result, the corporate sector will be worse-off. . Producers will sell the stock at lesser price again to cover the cost that result in deflation. Hence, it discourages investors and investment will decline.
Due to the past oil price shocks , the total macroeconomic damage occurred, the profits from the 1986 price decline to the economies of oil importing nations keep changing significantly. However, there were crucial impacts: economic growth declined significantly in most oil importing nations in the 2 years following the price increases of 1973-1974 and 1979-1980. Most of the big economic recessions in the United States , Europe and the Pacific since 1970's have been occurred before sudden rises in the price of crude oil even though other factors were important in some situations.(Terasa , 2008)
According to the UK National Statistics, UK factory gate prices increased at their highest rate for 9 months in November 2009 because of the higher fuel prices . Inflation accelerated from November to January because of the rising fuel prices , and increase in value added tax to 17.5% in February. Less productive capacity left more idle due to the recession than the Bank of England predicted which means that inflationary pressures might occur again quickly. The government reduce value added tax to 15% in December while short-term measure to increase spending . This is one of the monetary policy that the government conducted to increase demand and stimulate the economic growth. (Terasa , 2008)
According to the OPEC, the price will increase from $80 to $90 in the first quarter of 2010. In June 2009, US carried on borrowing excessively from China to pay for deficit spending and two US car manufacturers , GM and Chrysler, went bankrupt. Unemployment is increasing in US. As a result, US is trying to develop renewable local bio fuels to reduce their dependency on the fuel.
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