Oil is very important as it one of major sources of energy. With oil there is fuel that is made to run or vehicles, buses, airplanes, to run machineries and plants and to heat hour homes.
We have this unlimited need for oil but like any other natural resources, it is limited. One day in the future it is possible that we'll run out of oil. So as ordinary consumers we just accept and go with the flow as price of oil and other oil products increase up to the extent that we can no longer afford them. Ordinary people are the one greatly affected by this oil price hike that has a domino effect on everything we see.
Data AnalysisWhy are we experiencing oil price hike every now and then? Here are some possible reasons or causes of this event. The rise in the price of oil can be determined by several contributing factors. The simplest explanation is that the demand for oil is greater than the current supply. When demand exceeds supply, price will increase as people are willing to pay more. Depending on your political views and knowledge of the situation, you may also believe that the production of oil is much lower than capacity because certain middle-eastern countries know that America depends on oil imports more than other countries.An increase in oil prices will lead to a slightly weaker US economy.
The other reason is that OPEC ( Organization of Petroleum Exporting Countries ) is a large cartel arrangement that has the sole purpose of profit maximization as a whole. Thus they set the industry to maximize profits for the industry as a whole as opposed to competing amongst each other - this allows OPEC to effectively limit the output so that it corresponds to the profit maximizing level and drive up the price. Oil producing countries are having a hard time transporting the oil or bought by people even before the new batch arrives.These are just few and causes of increase of oil price are not decreasing but blowing up like itself. Oil price hike is a major problem.
Its chain reaction are inevitable so as to its effect to the price of commodities, consumers and industries. Oil price hike in the Philippines has a great impact for us Filipinos. There are increases in the food prices, high levels of unemployment and inequality of wealth and resource accumulation. Inflation will increase which means there will be less consumers.
Higher food prices: A fair proportion of the cost of food is distribution, fuel for farm vehicles and petro-chemicals. Furthermore, the emergence of bio-fuels means that higher oil prices has tended to exert upward pressure on agricultural commodity prices, since these can be used as a substitute for oil. Higher agricultural prices typically mean higher food prices in household shopping baskets. Retailers suffer, consumers don't have much choice about whether or not to pay for food or energy. They need to eat and they need to heat their homes.
Hence increased expenditure on these as their prices rise leaves less spare cash to spend on 'fun stuff' i. e. discretionary goods such as TVs and clothing. With the increase of oil prices, the living standards have been affected negatively in the non-producing oil countries, especially in the developed countries or the poor ones. Business profitability is adversely affected by high oil prices because it's a part of the cost of production.
Some businesses in discretionary sectors may close their doors completely. Others may lay off workers to get supply and demand back into balance.Airline Industry as an Example of Impacts on Discretionary Industries. High oil prices can be expected to cause discretionary sectors to shrink back in size.
In the case of commercial air lines, when oil prices are high, consumers have less money to spend on vacation travel, so demand for airline tickets falls. At the same time, the price of fuel to operate airplanes rises, making the cost of operating airplanes higher. Eventually, the commercial airline industry may shrink to such an extent that necessary business flights become difficult.ConclusionsWe therefore conclude that we are really dependent to oil just like how much we need water. People can't live without it. They are craving for it like food.
It means life. As it continuously increase, we as ordinary consumers can do nothing to stop it. We have no powers over those big countries and companies who are controlling its price. If only wages would reciprocally increase like what oil do, it wouldn't be a problem to a man to live in a world of expenses. But that's not the reality, as oil price increase salaries don't.
It's not even moving or if it does that would be little and won't be able to support a household. If we can't do any big action then let's try small solutions on how we can cope to this infinite problem. Since big things come from small beginnings. Recommendation Consumers who suddenly find themselves paying more for fuel are hit with the equivalent of a stealth tax, leaving less money available to fuel domestic growth through purchases or investments.
Consumers do respond to the price signal, and this response can provide some protection against further price spikes.We point out how we can mitigate against the effects of sudden price spikes, advocating for a better price signal in conjunction with long-term planning in order to allow consumers to prepare themselves in advance. First, they must simply cut back on driving as gas prices rise and if the place you're going to is not that far start walking. Demand for hybrid and electric cars is higher than demand for diesel. The government should invest in renewable energy alongside an increase in government regulation of the oil industry.
The best solution remains to be serious government regulation of the oil industry with the view of eventually shifting to renewable energy. We cannot sustain this dependence on imported fossil fuel under the present circumstances, we should not allow our energy security to be violated by market forces. The key is for government to regulate fuel prices while deliberately strengthening the country’s capacity to meet our energy needs using solar, wind, hydro and other renewable energy resources. Renewable energy can meet more than 50% of energy needs.