Impact of Falling Engine oil Prices

The prices of olive oil have experienced a great slide. That is from 147 us dollars a barrel, in the year 2008, to less than 50 dollars a barrel, as from this time (Morgenson, 4). That is more than a half of the decrease in the prices of oil. The greatest beneficiaries in the reduction of the prices of the chemicals are consumers. This is because they could buy gas at a reduced price, per gallon. That's within a variety of 2. 50 per gallon, down from the prior price of 4. 00 dollars per gallon. In just as much as this decrease in petrol prices is good news to consumers, on a general perspective, it has an extremely negative effect on the economic growth and development of all states. This includes that of United States, which is one of the major consumers of engine oil and essential oil related products (Pahl & Anne, 33). This newspaper argues that the low prices of olive oil, as they are witnessed currently, are extremely bad for the economies of the world.

One of the major influences of the slipping petrol prices is the destruction of economies that are closely relying on oil. For example the Russia, Venezuela, Iran, and even Saudi-Arabia. In a recently available rating of the Venezuelan credit debt capability, the united states was downgraded, which is due to a drop in the petrol prices, by more than 40% (Johnson, 5). It is because the country had a very low level of international reserves and forex. Furthermore, Venezuela is also experiencing financial declines, which is basically because it is unable to pay off its government personnel, and offer essential services such as healthcare services. In fact, President Maduro could tour most petrol producing countries, in a bet to influence them to reduce the development of petrol, but he was unsuccessful. Russia is also a different country that is negatively affected by a low price of engine oil (Johnson, 5).

Just as Venezuela, the Russian economy would depend on oil; because of this, the value of the Russian money has depreciated. Equally as Venezuela, the Russian bonds are trading at an extremely low price, which means that the two countries are experiencing a downturn. In a recent credit rating of Russia, the rates of defaults were very high, which means that trading in Russian bonds or debts was very high-risk. This is a sign that the Russian economy is experiencing a tough economy, largely because of engine oil, and partly as a result of economical sanctions that europe has positioned on Russia. Pahl & Anne (44) explains that cheap essential oil are not only hurting the economies of areas that are counting on the production and exportation of engine oil, but it is also harming economies of countries such as USA and United Kingdom.

For case, the United kingdom energy sector, specifically the oil industry is experiencing some recessions, which has resulted in the laying down of most employees, leading to a rise in unemployment. High rates of unemployment are harmful to an economy, which is mainly because it has the capacity for lowering the GDP expansion of confirmed state (Pahl & Anne, 38). There is also a reduction in the united states oil production, with the united states shale industry experiencing a decrease in its production. It is because shale oil companies are getting rid of drilling rigs from the domains of North Dakota and Texas. This means that that the industry is collapsing, and therefore it may lead to retrenchments and job slices. Another negative effect of low oil prices is a decrease in innovation.

Because of cheap oil, experts would reduce on the research, hence failing to produce other innovative means of relying on olive oil, or discovering other measures about how to lower the costs of olive oil (Morgenson, 9). It is important to explain that innovation is one of the factors that has resulted in the growth of the highly leading economies such as United States, United Kingdom, France, China, Japan, Germany, etc. Without invention, then its likely that high these countries wouldn't normally produce better innovative solutions that can help in the progress of these economies. Furthermore, cheap oil prices will not only negatively have an effect on companies that are on the petrol industry, but also other companies that are in the making, retail, and service sector.

For illustration in the housing industry, cheap olive oil prices can lead to a land in the costs of houses, making developers to go to a loss. It is important to explain that the major beneficiaries of cheap oil prices are consumers, and companies such as Wal-Mart which are practicing cost authority strategies. However, to sectors and companies, this is a poor trend, and this is because it could lead to nov the firms or industries under consideration, because of a low deal of its products. This might subsequently make these businesses to are unsuccessful in increasing their earnings. That is disadvantageous to the current economic climate, mainly because there will be a minimal rate on new opportunities, and the rates of job creation would be low.

However, Kruse (19) disagrees with this suggestion that cheap engine oil prices have a negative result to the overall economy. In demonstrating his point, Kruse (27) clarifies that oil is energy product, which can be used for purposes of facilitating production. Therefore, Kruse (18) explains that when it is cheap, the expenses of creation would reduce, resulting in increased earnings. Furthermore, Kruse (33) asserts that cheap olive oil prices are advantageous to an overall economy, and he offers an overall economy of countries such as China, Japan, and other Asian countries that closely imports energy products. He asserts that by importing cheap engine oil, its likely that high that their economies would experience some components of growth. In around Kruse (18) is right, when he denotes that a reduction in engine oil prices have an effect of reducing development costs, this might have a long process and period of time.

This is basically because a reduced petrol price, would total a decrease in the sales value of products, and this is bad for a company that is aimed at maximizing its earnings. Countries that greatly rely on petrol would be at a loose, and this is because they might not have the ability to get value for his or her olive oil products or chemicals (Pahl & Anne, 38). Furthermore, in a written report published by the earth Standard bank, there are signs that the global market is on the drop, as from the entire year 2014 (Johnson, 7). That is despite of the targets that the oil price would still experience some components of decline. This is an indication that the reduced amount of petrol prices cannot lead to the introduction of an economy, and instead, it can play a substantial role in its decrease.

In conclusion, a reduction in petrol prices is not good for an economy. One of the reasons is the fact it could lead to the devastation of the economies that depends on the exportation of oil, and this includes countries such as Iran, Russia, and Venezuela. The reduced price of oil also plays a role in the collapse of market sectors that are responsible for producing oil. Which means that there would be laying from workers, and this would lead to an increase in unemployment, which is bad for the GDP of market. However, there are arguments that cheap olive oil prices are beneficial to the economy, because of a reduction in the costs of products. This is merely good for customers, and not to the complete economy all together. Therefore, cheap essential oil prices aren't good for the economy.

Works Cited:

Johnson, Keith. "The Good, the Bad and the Ugly of Plunging Olive oil Prices. " FP Magazine. 13 Jan. 2015. Web. 25 Mar. 2015.

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Pahl, Nadine, and Anne Richter. Engine oil Price Trends - Drivers, Economic Repercussions and

Policy Replies. Muˆnchen: GRIN Verlag GmbH, 2009. Internet source.

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Kruse, Felix. Olive oil Politics: The Western world and Its Desire to have Energy Security Since 1950. S. l. : Anchor

Academic Publishin, 2013. Printing.

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Morgenson, Gretchen. "What's SO VERY BAD About Cheap Engine oil?" The New York Times. THE BRAND NEW York

Times, 17 Jan. 2015. Web. 25 Mar. 2015.

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