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The increase of gas prices in the united states essay

The impact of rising fuel prices 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 the increase of gas prices in the united states essay sector and their influence on consumer behaviour. 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 maintainedit will have significant macroeconomic influence on economy. According to the net-oil exporting nationsa 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 contrastthe rise in fuel prices have negative impact on oil importing countries while these countries must produce goods and services. As a result of thisoil importing countries needs more energy to run their local economy.

The cost of production has risen because of the increase in fuel pricesand 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 the increase of gas prices in the united states essay 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. The rising oil prices since 1999, leaded to the global economic crisis in 2000-2001.

As a result, the world GDP growth experienced a decrease from 1999-2004. Due to the expectations that is related to OPEC supply cuts, political tensions in Venezuela and strict stocks increased international crude oil and good prices in March 2004, market conditions are more volatile than usual, United States were trying to increase crude oil prices. Greater fuel prices lead to higher unemployment rates and compounding budget deficit issues in many OECD and other oil importing nations.

The negative economic influence of higher oil prices on oil importing poor nations is more dangerous than for OECD countries. These economies extremely need imported oiland the energy is utilised ineffectively. Developing nations find it difficult to adjust the financial turmoil damaged by higher oil import costs.

This is due to the economic process yielded by greater oil export earnings in OPEC and other exporting nations would be more than outweighed by the negative impact of higher prices on economy in the oil importing nations. Terasa2008 Company's big losseslack of consumer confidencewrong policy reactions and greater gas prices will strengthen these economic impacts in the medium term. If the fuel prices remain higher, the economic situation of fuel importing nations will be at risk.

Due to the past oil price shocksthe 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: Most of the big economic recessions in the United StatesEurope 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.

Terasa2008 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 pricesand increase in value added tax to 17. 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.

This is one of the monetary policy that the government conducted to increase demand and stimulate the economic growth. Unemployment is increasing in US. As a result, US is trying to develop renewable local bio fuels to reduce their dependency on the fuel. The higher fuel prices result in inflation, risen input costs, reduced investment in oil-importing states. The tax revenues decline and the budget deficit rises because of the rigidities in government spending that increases interest rates.

An oil price increase results in upward pressure on nominal wage levels due to resistance to real decreases in wages. Wage pressures and declined demand cause higher unemployment rates in the short run.

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Moreover, lower consumer spending affect all businessespecially small business are in bad position due to the declined consumer spending. Higher interest rates decline the disposable income of consumers due to the higher debt service costs. While consumers increase their expenditure on servicing debtthey do not have enough money to purchase other products.

Terasa2008 Net oil importing countries encounter a deterioration in their balance of payments, and reduces exchange rates. As a consequenceoil importing countries imports will be more expensive whereas exports are less priceless, resulting in a decline in real national income.

If there is no change in central bank and government monetary policiesthe dollar might increase while oil-producing nations demand for dollar denominated multinational reserve asset increase. The economic reaction to greater inflationhigher unemploymentless exchange rates, less real output also affects the overall influence on the economy for the long-term. Rising fuel prices lead to high shipping costs. As a result, shipping costs indicates higher taxes that makes them more expensive for foods.

For valuable and less weight products such as electronics shipping costs are tolerable. By contrast, for less valuable and heavy-weight products, shipping cost might higher than the value of the products. If oil prices were to carry on increasing ,it would become unprofitable for China to carry on importing iron ore from foreign countries.

Shipping firms are damaged by higher fuel prices. Aircraft firms like Aircastle are damaged by increasing oil prices. The retail industry is damaged by increasing oil prices because shipping firms charge greater pricesit become harder for retailers to obtain their goods to market and put pressure on them to increase prices. Discount retailers such as Family Dollar StoresDollar Tree Stores and Wal Mart are left vulnerable while their customers have less incomes, making them more sensible to increasing energy prices.

Online retailers which fund the cost of shipping such as Amazon. Higher transportation costs encourage producers to relocate production facilities closer to suppliers or markets according to the transportation volume such as input materials and the final product shipments. These factors are affecting changes in global trade flows because of the increasing fuel costs.

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The big increase in the world trade has contributed to decrease the difference in wage rates and returns on capital among nations. As a result, factor price equalization occurs in the world markets today. This makes export producing unprofitable in developing nations. As more products are manufactured at locations which are near the end markets, world trade growth might reduce if some production reverts to local manufacturing.

  • The increase in the price of oil has risen the cost of fertilizers which need petroleum or natural gas to manufacture;
  • To overcome this technological difficulty, experts should invest in invention in energy generation;
  • Many nations face higher inflation rates due to the rising oil prices in the world.

Currencies will alter to changes in trade balances. Greater fuel prices will result in an increase in the value of the dollar ,therefore, oil exporters invest their windfall earnings in US dollar controlled assets and transactions demand for dollar rises.

  • Auto manufacturers have decided to manufacture electric cars and they might make more profits if oil prices will rise in the future;
  • Natural gas might substitute for petroleum in some cases, rising pricing for petroleum lead to rising prices for natural gas, therefore , for fertilizer;
  • Discount retailers such as Family Dollar Stores , Dollar Tree Stores and Wal Mart are left vulnerable while their customers have less incomes, making them more sensible to increasing energy prices.

A stronger dollar will increase the cost of servicing the external debt of oil-importing poor nations, while this debt is denominated in dollarscompounding the economic hit caused by greater fuel prices. It will also strengthen the affect of higher oil prices increases the oil-import bill in the short-run, with the low price elasticity of oil demand.

Oil shocks that world has experiencedprovoked debt-management crisis in many poor nations. The increase in the price of oil has risen the cost of fertilizers which need petroleum or natural gas to manufacture.

Natural gas has its own supply issues as oil. Natural gas might substitute for petroleum in some cases, rising pricing for petroleum lead to rising prices for natural gas, thereforefor fertilizer. Costs of fertilizer raw materials have been rising while rose production of staples rises demand. Farmers are constrained to the old means of ploughing due to the higher oil prices.

It makes expensive delivering and shifting their stocks to the market. The high oil prices have negative impact on farmers that makes difficult for them to grow season crops because fertilizers are soaring due to expensive fuel.

There is a strong correlation between food and fuel prices and can be tackled if people could control the fuel consumption and provide the agriculture industry the sources they needed to produce more.

The large firms such as airlines, holiday firms and shipping industry will increase their prices due to the greater fuel prices. However, consumers are not likely to utilise the services as they did before which means that firms will suffer big losses. Moreover, companies will cut their staff to balance their current accounts.

Transportation costs will increase and the corporate and the farming sector will experience losses. The cost of delivering products to different locations will become more expensive than before. Unemployment will rise that has negative impact on shrinking economies. It also leads to rise in poverty. During the job lossesgovernments must take action to support those who have become redundant with controlling their household.

Thereforegovernments will utilise taxpayer's money which will rise the burden on tax payers. During the difficult economic climate in the world, firms are merge with another firm to survive in the market. British airways suffered biggest loss since the firm was privatised in 1987. Fuel costs increased 44. As a result, more than 2500 workers were laid off since the last summer by British Airways.

Oil power carstrucksboatsair planes and power plants are vital for the world economy. While oil prices increasecosts rise for transportation firms, put pressure on their profits and forcing them to increase prices, influencing all the other firms that rely on transporting goods and people.