Over the past few years gas prices seem to always be in the news. In one week they are extremely high and the next they are extremely low. This volatility in gas prices is not a positive trend four our country as we are trying to increase stability and then in turn increase our economic growth. Unfortunately, these bouncing prices leaving the U.S. behind other countries as our growth rate is 2 - 2.5% and not the 5% expected globally.
In March gasoline prices rose 10.6% making it more expensive to commute to and from work. This expense eats up any increases in income that may have been experienced during the past month. Furthermore, it costs companies more to transport their products, send mail, and get supplies. This increase in cost in transportation and resources will again be sent back to the consumer who experiences further income loss for basic necessities.
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Thus a substantial and sustain increase in oil prices has a compounding effect on society and the economy. Heating costs are higher, food costs which use gasoline in tractors are higher, product costs are higher, the cost of war which uses lots of fuel goes up, less jobs are produced and things cost more money across the board.
The good news is that when checking on the price of food and clothing (basic necessities) it was found that clothing costs reduced slightly while food rose only slightly. In other words, the higher cost of fuel is not reflected in other product which means it is not yet damping the economy. It can be said, however, that the rise in fuel cost is one of the major contributors to the rising of inflation and loss of realized income.
The faster the Country can develop alternative sources of fuel that are both sustainable and cost effective the less reliance on oil. The less reliance on oil the less likely the price of oil will bounce around and affect the economy. A more stable economy means a better chance of sustained growth in GNP, jobs and investments.
How Gas Prices Affect Our Economy
Murad Ali is a three time published author, a human resource professional and a doctoral candidate. [http://www.thenewbusinessworld.blogspot.com]