The Prime Minister of Britain Gordon Brown described this as the increase worrying situation in oil world faced oil. It thesis writers block noticed i do my homework after school as and when the Inflation rises the purchasing power goes down due to rise in essay commodity prices. As a fact there are various types of inflation. It is believed price every country is affected by and falls under one of these categories during recession, part of my research will also try to gain hike insight and study as to which category does UK falls into, essay its impact is being felt on price Airlines, Banks Supermarkets.
This fall in the price of oil has a significant impact in reducing transport and other business costs. Falling oil prices is good news for oil importers, such as Western Europe, China, India and Japan; however, it is bad news for oil exporters, such as Venezuela, Kuwait, Iraq and Nigeria.
Impact of lower oil prices on oil consumers Lower oil prices help to reduce the cost of living. Oil-related transport costs will directly fall, leading to lower cost of living and a lower inflation rate.
A fall in oil prices is effectively like a free tax cut. In theory, the fall in oil prices could lead to higher spending on other goods and services and add to real GDP. Macro economic impact of falling oil prices Lower inflation Higher output This diagram shows that a fall in oil prices and a fall in firms costs will shift the short-run aggregate supply SRAS to the right, causing lower inflation and higher real GDP.
Balance of payments Oil importers will benefit from a falling oil price because the value of their oil imports will drop. However, for oil exporters, a falling oil price will do the opposite reducing the value of their exports and causing lower trade surplus. The UK is currently a small net importer of oil, so will have limited impact on UK current account.
Oil exporters For oil exporters, a falling oil price is bad news. Many oil exporting countries rely on tax revenue from oil production to fund government spending. Falling oil prices will lead to a government budget deficit, and will require either higher taxes or government spending cuts.
Other oil exporters like Venezuela are relying on oil revenues to fund generous social spending. A fall in oil prices could lead to a significant budget deficit and social problems.
Other oil exporters, such as Saudi Arabia and UAE have built up substantial foreign currency reserves; they can afford temporary falls in oil prices because they have substantial reserves. This is why Saudi Arabia has so far not responded by cutting output.
Why falling oil prices is not enough for Europe Usually falling oil prices would be welcomed by oil importing countries. However, many are deeply fearful about prospects for the European and global economy. Firstly, the fall in oil prices is largely a reflection of weak global demand. Continued low growth around the world, is holding back demand.
Thus the falling price of oil is a reflection of weak global growth — rather than the harbinger of economic recovery.
EU inflation has fallen to a five-year low 0. This is a concern because deflation tends to cause serious macroeconomic problems:India is highly dependent on imported oil products and the drastic increase in the prices of crude oil to as high as $/bbl, this jump has become a greater concern as a risk factor in a fragile Indian economy.
The price of Indian basket of crude oil has ranged from US$ per barrel in to a low of US$ 46 per barrel in The price in April is US$ per barrel. Hybrid car producers such as Toyota, Honda, GM and Nissan take advantage of greater oil prices because higher oil prices result in greater gas prices, encouraging customers to find out ways to decrease the amount of gasoline that they utilise.
As at the start of twenty first century, the oil prices have shown a significant increase, but the most significant rise in oil prices started around the year As mentioned earlier, these upheavals in oil prices have adverse effects to the economy of each nation.
FALL IN CRUDE PRICES & ITS IMPLICATIONS ON INDIA Introduction: The presence of crude oil was first discovered in China way back in 3rd or 4th century A.D. The presence of oil in India was discovered in late at Digboi in Assam where the first crude oil refinery was set up in India was a major gainer of the fall in crude oil prices as it depends on imports to cover over 75% of its requirement.
While on the one hand, the low prices helped in containing the current account deficit and lowering inflation, on the other hand it augmented revenues.