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economics oil prices

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Introduction

The causes and effects of the significant rise in oil prices Recently the price of oil has risen significantly in the last few years. This is because of a number of reasons. Due to the price of oil increasing this has a number of effects in the world. One reason why oil price has risen is due to the fact that it is going to run out and is fairly scarce. Because there isn't much oil is left in the world the price increases. This also means that, because it will eventually run out, that an alternative needs to be made/invented to replace the way we travel, power our lives and generally how we live. Also the use of oil, a fossil foil, releases harmful fumes into the atmosphere, thus damaging the atmosphere causing global warming. Because there is such a risk in using the oil, and because we need an alternative for when oil runs out, investment in non-oil power will increase. This will mean that the non-oil markets will grow and expand. This is a form of economic growth. ...read more.

Middle

The reduction in supplies has been relatively modest but it has caused some doubts about Iraq's longer term prospects of becoming a large and stable oil exporter. Attacks on foreign workers in Saudi Arabia by Al-Qaeda-inspired militants have also increased tensions. Any substantial attack on Saudi oil facilities would be a major event for world oil markets. The country is the world's biggest oil producer and, by far, the biggest exporter. If these attacks did take place and were substantial, the world and its economy would suffer greatly. This is because, currently, oil is the main way we power our lives. Another reason why oil prices are so high is due to the increased demand from industrial countries, mostly China. China's rapidly expanding economy needs oil to power it factories and businesses. Because they are such are large country, the oil needed for petrol ect., and have large amounts of oil driven products and oil derived products they need to demand vast amounts of oil. Chinese demand is up 20% over the past year. This table shows how increase of demand can affect the price. ...read more.

Conclusion

As the consumer will have to pay more, they will not be as willing to use the service, making this market dwindle slightly. Other similar markets that do not use oil, although not many, may pick up the lost consumers. Every good in the world will need to be transported to places where they will be sold. This will mean that transporting goods will be more expensive. Because of this, the price of almost every good will increase to make up for extra transport costs. A lot of products are derived from oil. This will mean that the cost production will increase. Therefore, the extra cost will be passed onto the consumer. The significant rise of oil prices affects a vast amount of things in the world and is down to many reasons, for example increased demand leads to a rise in price. This rise in price effects many other markets in the world, not only the oil market. Because all these other markets are affected, they need to increase the price of many goods. Ultimately, the worst affected by the rise in oil prices is the consumer. Not only will they only need to pay more for transport, almost everything else they use will be more expensive. By Ryan Goody. ?? ?? ?? ?? Ryan Goody ...read more.

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