Sunday, November 25, 2007
Tuesday, November 20, 2007
Shock Treatment
There have been two major oil spikes in history during 1973 and 1979. It was caused due to the Petroleum Exporting Countries limiting the oil shipments hoping to manipulate the price of world oil. Higher oil prices damaged the economy since it acted as a tax increase. With consumers paying an increased price for oil, people start demanding for higher wages. This causes businesses to lower their profit margins leading to people getting laid off. Although economists say this hasn’t been a problem in the present time. Oil is a portable form of energy used in most purposes, but now it is used less frequently. There are new and better methods of energy production, thus our dependency on oil has decreased immensely. This is the reason why an increase in oil prices will have a lower impact on the economy than if it would have fluctuated a few years ago.
Oil is a scarce resource that people need in order to do daily activities in their lives. Being the only fuel to power cars, it’s in great demand making it something valuable that the Petroleum Exporting Countries can manipulate the price of. The higher the price they cause it to be, the more people get deterred from buying a greater amount of it. As the price increases, the demand decreases. Also, this affects the choices of some people since the more money that they put into purchasing car fuel; the less they have to spend buying food, clothing, and other items. The rising oil prices changes the attitudes of people towards the way they spend there money on other products.
I think that the economists are correct saying that the demand for oil is less now a days; a reason the economy hasn’t been impacted greatly by the rapid increase in oil prices. With technological advancements, substitutes are created that are more energy efficient, reducing the necessity of oil. I can also see this happening as people are reducing their use of technology that requires oil to operate. Another thing happening is people conserving gas, by carpooling or reducing the amount of driving by shopping at nearby groceries. Overall, as long as gas is affordable for people to use for their cars, then the economy should be fine since there is technologically development in reducing our dependency on oil.
http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=10130655
Oil is a scarce resource that people need in order to do daily activities in their lives. Being the only fuel to power cars, it’s in great demand making it something valuable that the Petroleum Exporting Countries can manipulate the price of. The higher the price they cause it to be, the more people get deterred from buying a greater amount of it. As the price increases, the demand decreases. Also, this affects the choices of some people since the more money that they put into purchasing car fuel; the less they have to spend buying food, clothing, and other items. The rising oil prices changes the attitudes of people towards the way they spend there money on other products.
I think that the economists are correct saying that the demand for oil is less now a days; a reason the economy hasn’t been impacted greatly by the rapid increase in oil prices. With technological advancements, substitutes are created that are more energy efficient, reducing the necessity of oil. I can also see this happening as people are reducing their use of technology that requires oil to operate. Another thing happening is people conserving gas, by carpooling or reducing the amount of driving by shopping at nearby groceries. Overall, as long as gas is affordable for people to use for their cars, then the economy should be fine since there is technologically development in reducing our dependency on oil.
http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=10130655
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