Short Course on Applications – Getting to Square 1

Facts About Oil Prices The cost of oil affects the economy of the whole world. It is economically destructive for countries that are still developing and it is financially straining to countries that are already developed. Both the increase and decrease of oil price have huge effects on some aspects of a countries economy such as the supply, demand, and terms of trading. Other economic aspects are also affected such as domestic homeowners, banks, governments, inflation rates, exchange rates, and the stock market. The purchasing power of homeowners decreases when the demand for oil increases. This rule can be applied to an increase in precautionary savings and the price of operating machines that run through energy. The increase in the cost of oil production, on the other hand, affects the supply side of the economy. Conclusively, a strain on the terms of trade of an economy occurs by reason of the increase in the cost of import for countries that import net-oil. Some countries rely on oil import for the growth of their economy. This makes them exposed to other countries, thereby making them vulnerable to be taken advantage of. Countries must decrease oil prices in order to match the world price which is lower. At the same time, increase in production costs may cause a negative return for these countries. Usually, this occurs when the federal reserve starts intervention and manage economies. A restructuring of the economy is intended to suit the immediate change in oil price. A lot of economists protest the idea that the problem will just grow if the budgetary policies are manipulated. A high demand for commodities is created when interest rates are decreased as it causes an increase in the spending of customers. The cost of oil is pressured as the investment grows. Countries that are heavily dependent on the act of importing oil are the countries that become susceptible to bankruptcy. It may seem great if an economy spends a lot. Countries, however, neglect the underlying problem which involves the cost of oil. There are less savings when there is an increase in the spending of an economy. The spending of people are cut back and the saving of money is prioritized when they are bushwhacked by the sudden increase of oil or gas prices. Less oil or gas is being consumed which makes producers of oil or gas crippled as the price or cost of oil or gas has increased. This now results to the less production of gas and oil by producers or company owners which increases the cost of production. This will further result to a continuous cycle of budget decline. Oil prices also affect the rates of inflation. Economists wrote “Cheap oil imports in non-dollar-denominated currencies will be caused by the depreciation of the US dollar”.Study: My Understanding of Products

Study: My Understanding of Products