How the Price of Fuel Affects Our Economy

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How the Price of Fuel Affects Our Economy

6 November 2015
 Categories: , Blog

It's always a nice surprise when you go to the gas pump and see lower fuel prices. It gives you more freedom to spend your money elsewhere and allows families to consider taking more trips out of town. Low fuel costs can save people money in a number of ways, but when the price goes up, it also has a profound effect on the economy. Read on to learn how fluctuations in fuel costs take a toll on the United States economy.

Lower Costs

Fuel is used to transport goods and provide services all over the world. When the cost of fuel is reduced, those savings are passed onto the buyers and manufacturers of products, who in turn lower their purchasing prices. This means families can buy more groceries and the sale of goods like electronics and clothing go up in volume due to lower price tags. Everything from moving companies and taxi cabs to shipping charges online and service call costs for technicians tend to go down in price. Even the way businesses hire people can be affected by fuel prices. When they are lower, companies are more prone to hire new employees because their overhead costs are also lowered. On the other hand, investors tend to lose money when oil and fuel prices are reduced. Their profits go down and they can be at risk of losing money.

Higher Costs

When the cost of fuel is increased, the US economy slows down a bit in regard to consumer goods being sold. Prices begin to rise, and the average American may be hesitant to make bigger-ticket purchases. Travel slows down as well. Even airline fuel costs are affected by higher prices, resulting in increased ticket costs that are passed down to the consumer. Smaller impacts such as the purchase of sodas and snacks at small service stations decrease, since customers no longer have a few extra dollars to spend while at the pump. But there are a few sectors who actually benefit from higher fuel prices. Investors certainly see a profit and the electric and hybrid car markets see a spike in profits as well. When consumers lose confidence in the gasoline market, they start to consider other ways to save their hard-earned cash. Purchasing more environmentally friendly vehicles that need less gas is something people start to consider, and makers of these cars may see an increase in new car purchases. The cost of fuel whether high or low has many different impacts on both the US and global economy.

Contact a company like Small & Sons Oil Dist Co if you'd like to learn more about this phenomenon.