How Oil Prices Affect The Economy
Updated: Feb 8
You may have noticed that gas and diesel prices have risen lately. And I'm sure you remember when gas was $4 or more dollars per gallon just a few years ago. Well, how does that effect the economy? And why should you care?
Fossil fuels have been the backbone of civilization ever since the industrial era because they have proven to be the most efficient and convenient means of powering equipment. So not only do vehicles run on gas, a lot of other machines do too.
A classic example of supply and demand caused oil prices to rise a few years ago, but the US intervened by increasing domestic production and reducing reliance on imported oil. However, recent changes in how goods are delivered to consumers, along with international crises like the Suez Canal jam have increased demand, and prices, once again.
What does this mean for you? Increased cost of doing business and thus, increased cost of living... in a word, inflation.
Because it costs companies more to transport their goods from overseas, fly it to your area, and drive it to your local store or residence, they have to charge more to make a profit. This puts strain on family and corporate budgets... which has a domino effect on countless other things.
Oil prices are a big deal.