In June 6 our world are shocks with increasing price of oil, $140 for a barrel. This wills effect the economic growth around the world because oil is the major source of energy. Good and service that need oil to transport from firm to consumer. So a little increasing price of oil will lead to higher price of good and service. Recently the oil price is keeping increasing. Crude oil climbed more than $10 to $138.54 a barrel. The increasing of oil price is crucial to keep the demand low and sustain the amount of oil that keeps increasing. Consumer may find other alternative that can exchange oil usage such as natural gases but this will take time to happen. So at the meantime, the increasing of oil wills slowdown the economic growth to entire nations. In United State has already seen the effect of this menace. Recession is happening in the country now and highly likely to lead recession to other developed country like China, India south Korea, and Japan. As the price oil increase, price of product will increase because cost of oil is widely used in most process. So SRAS graph will shift to the right. [pic]
This problem must be deal fast so it can prevent recession. In five nation meet; China, India, South Korea, India, Japan dealing this problem by increase investment to keep market well supplied. This investment called replacement investment. It occurs when firm spend on capital in order to maintain the productivity of their existing capital. In other way, South Korea provides 10.5trillion won in tax rebates and subsidies to help consumers and businesses cope with surging energy cost. These government interventions in form of subsidies and tax rebates can help producer to maintain stability of price. Transports, processing and delivering that use oil for its main energy will subsidized by government. For Australian government, the Prime Minister Kevin Rudd urges the Organization of Petroleum Exporting Countries to boost up the supplied more than 40 percent. If...
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