If you follow the developments in the oil market you may know that oil price varies with tepid downward trend. Though, oil is still expensive, while some predict that it will rise in 2013. The new cheaper output sources which should raise their production are not so cheap after all. If the output continues to come from such sources, the prices would definitely remain high. The growing demand could be satisfied but the oil producing cost will keep its soaring value.
In respect of the rising oil prices other commodities also go up. The price of food and other goods get higher because oil is used in transportation, growing and other business procedures. Since petrol products are used for almost every type of transportation, the cost of product shipping rises in respond. Asphalt and other chemical products made form oil also are directly connected to any rise in oil prices.
Oil producing companies always strive to extract from the easiest and cheapest source. Though, nothing lasts forever. Now almost all of these sources are depleted and new ones must be found and developed. And that costs a lot of money. There are also complications along the process. The present stockpiles are under the ocean or need fracking technologies, or any other specific feature that needs additional funding. That funding will come directly from our pockets. The cost of oil output will rise quicker than the inflation rate. That is due to the decreasing return situation put into the worldwide scene.
It is also easy to get the idea that the rise in oil prices doesn’t lead to rise in salaries. So what happens when the cost of all goods and commodities rise while the wage stays still?
Something should drastically change. This price gap is maybe the major reason why the world has slumped into a global recession during the past years.
As the price of oil grows the consumer limits down its leisure spending in order to keep money for basic expenditure for food, bills etc. This is the domino effect. When these cuts appear economic sectors involved with travel, tourism, dining and many more suffer in respect. The struggling sectors demand for more debt and drive further consumers’ spending cuts.
The endless cursed circle doesn’t have an end. As the unemployment level rises government have to pay more unemployment benefits and add stimulus payments. That is how debt is generated. And if there was some previous debt which is very possible, the government has to rescue the struggling central banks. We all know what the current situation in the US is. Additionally the tax income is lower due to the high unemployment levels. High oil prices is one of the main reasons for all the current debt issues in big oil-importing countries like US, Japan, parts of the Euro Zone and others.
