Effects of Rising Oil Prices

Satisfactory Essays
In the past, the price of oil has led to economic recessions, such as the 1973 and 1979 energy crises. The effect the price of oil has on an economy is known as a price shock. In many European countries, which have high taxes on fuels, such price shocks could potentially be mitigated somewhat by temporarily or permanently suspending the taxes as fuel costs rise.[138] This method of softening price shocks is less useful in countries with much lower gas taxes, such as the United States.
Some economists predict that a substitution effect will spur demand for alternate energy sources, such as coal or liquefied natural gas. This substitution can only be temporary, as coal and natural gas are finite resources as well.
Prior to the run-up in fuel prices, many motorists opted for larger, less fuel-efficient sport utility vehicles and full-sized pickups in the United States, Canada, and other countries. This trend has been reversing due to sustained high prices of fuel. The September 2005 sales data for all vehicle vendors indicated SUV sales dropped while small cars sales increased. Hybrid and diesel vehicles are also gaining in popularity.[139]
In 2008, a report by Cambridge Energy Research Associates stated that 2007 had been the year of peak gasoline usage in the United States, and that record energy levels would cause an "enduring shift" in energy consumption practices.[140] According to the report, in April gas consumption had been lower than a year before for the sixth straight month, suggesting 2008 would be the first year U.S. gasoline usage declined in 17 years. The total miles driven in the U.S. peaked in

You May Also Find These Documents Helpful

  • Powerful Essays

    A rise in global oil prices by $ 10 per barrel would reduce India's economic growth by 0.2 percentage points and also affect the country's current account deficit, Goldman Sach said. "A VAR (value-at-risk) analysis suggests that a $ 10 increase in oil would reduce GDP growth by 0.2 percentage point," Goldman Sachs said in its latest edition of 'Asia Economics Analyst'. India on Monday voiced serious concern over the rising crude oil prices, which have touched a two-year high, and said it could…

    • 1973 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    EFFECT OF RISING OIL PRICES ON PAKISTAN TRADE BALANCE ABSTRACT: The objective of this term paper is to explore the correlation between rising oil prices & deterioration in trade balance of Pakistan. This paper analyzes how the increase in oil prices affect the import bill & export earning of Pakistan .The study consist of annual data for the period 1985-2010.Pakistan is not an oil producing rather oil-importing country. An increase in oil…

    • 2723 Words
    • 11 Pages
    Powerful Essays
  • Satisfactory Essays

    Rising Prices

    • 316 Words
    • 2 Pages

    Rising prices Rising Prices is becoming an acute problem these days. One has to live from hand to mouth. It has made difficult for everyone to meet both ends. It has forced people to live a miserable life. Necessities are being sold at a great price. The hardest hit is the common man, that is, the average consumers and the below average consumers or we can say the middle class people and the poor people. Due to price rise, the purchase of essential commodities like pulses, rice, sugar or medicines…

    • 316 Words
    • 2 Pages
    Satisfactory Essays
  • Powerful Essays

    Effects of Crude Oil Prices

    • 5103 Words
    • 21 Pages

    affect does the price of oil and gas have on the economy? How does this affect the daily lives of the entire population? The preceding questions are the basis for the enclosed report. The primary objective of this report is to give a few reasons as to what causes prices of oil and prices of gas to rise. Among these reasons, speculation of things that may or may not happen, like a terrorist strike, is one of the leading factors. Another reason for the continued rise in prices of oil and gas is the…

    • 5103 Words
    • 21 Pages
    Powerful Essays
  • Better Essays

    Oil price

    • 1163 Words
    • 4 Pages

    Syria and Ukraine, oil prices increased significantly as did the profit earned by many oil companies including PETRONAS. Politicians in Malaysia opposed the government policy to oil price increase by twenty cents and the withdrawal of oil subsidy. As a manager or policy implementer, discuss the pros and cons if this policy in the context of the various theories of profit. Introduction The government of Malaysia increased the price of oil by 20 cents and withdrawal of the oil subsidy causing the…

    • 1163 Words
    • 4 Pages
    Better Essays
  • Powerful Essays

    Oil Price

    • 1914 Words
    • 8 Pages

    AND CONs OF INCREASING OIL PRICE 1. INTRODUCTION In this decade, the price of oil has been raised 3 times. The era of President SBY has the record of increasing oil price (premium). The policy was made by SBY has become pro and con between the expert of economic. Some people said that increasing the oil price is just can’t be done because it’s contra with UU, but government said that if we don’t raise the oil price it will absorb the APBN because the import oil price is higher and higher time…

    • 1914 Words
    • 8 Pages
    Powerful Essays
  • Powerful Essays

    The Economic Impact of Rising Oil Prices in Automotive Industry The rise in the oil prices plays a major role in the automotive industry. “The world consumes over 82 million barrels of oil per day (BPD), with the united states taking roughly 20 million BPD” (McFarlane). Oil provides 97 percent of the transportation fuels that helps to run the cars, trucks and other vehicles in the nation’s highway (Heinberg). Thus, when the price of the oil rises, it clearly concerns the auto industry because the…

    • 1766 Words
    • 8 Pages
    Powerful Essays
  • Better Essays

    Rising Gas Prices

    • 1150 Words
    • 5 Pages

    contribute to rising gasoline prices. The major cause for increasing gasoline prices has to do with refining capacity. Even if oil were inexpensive, we would still have a problem converting it into the gas that fuels our economy. That is what keeps the gas prices high. When gas supplies are short, due to an “inability to refine crude oil into gas efficiently,” prices increase. This is a component of supply and demand economics. In a positive aspect, rising gasoline prices do serve a purpose;…

    • 1150 Words
    • 5 Pages
    Better Essays
  • Powerful Essays

    Rising Food Prices

    • 1552 Words
    • 7 Pages

    Rising food prices Introduction: Food prices have been on the rise and have become a global issue. Prices have soared over the past year and a half and threaten to go up further if issues are not addressed immediately. Below is a look at how prices have been over the past year. Figure 1. FAO Food Price Index: February 2007 - January 2008 Source FAO, 2008 In this project, we attempt to find out the causes for this price rise, the trends of the rise and the effects that this rise has had on us. Causes:…

    • 1552 Words
    • 7 Pages
    Powerful Essays
  • Good Essays

    Nancy Clayton Microeconomics: week 4 September 22, 2011 Effects of Supply and Demand on the Price of Oil Each time you pull up to the pump or open your utility bill, you may notice the price of fuel may have changed. There are many factors that can influence fuel prices. The marketplace forces of supply and demand determine the price of fuel. If demand grows or if a disruption in supply occurs, there will be upward pressure on prices. By the same token, if demand falls or there is an oversupply…

    • 775 Words
    • 4 Pages
    Good Essays