The Effect of Oil and Gas Prices on the Economy Research Proposal
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The Effect of Oil and Gas Prices on the Economy
High oil and gas prices have great effects in many aspects of economy. And consumers are the main variables that can realize its impact. Due to the different changes in the world market and the appearance of war in Middle East, the imported oils are in great peril for unstable pricing.
Background of the Study and Problem Statement
Considering the fact that there are high oil, gas and petroleum prices, economies in different parts of the world are struggling to keep the oil deposits in the level where the people needs it most. Although there are various monitoring and updates on the oil prices, different countries felt the impacts of oil. As part of being the necessity, oil prices are unpredictable and the developing economies cannot catch up to the changing prices of oil.
The first objective of the study is to recognize the different effects of oil prices in the economy. With that recognition, countries can have a chance and enable to prepare an adequate plan on how to minimize its impact, which is the second objective of the study. Since the countries cannot avoid the changing price of oil and other related products, they should focus on how to lessen the effects of the prices unto the direct consumers.
The issue on the prices of the oil in the world market is a great topic. Therefore, the study prepared precise questions that can help the entire study present the adequate answers on the effects of the oil prices in the economies.
1. What are the different usages of oil and petroleum products, making it as one of the most valuable products?
2. What are the troubles that it caused in different organizations most especially on the franchisers of oil?
3. What are the particular dilemmas of common consumers in the presence of high prices of oil?
It has been a debate on how well the devotion of the financial analysts and economists in determining the different impact of oil due to the price change. On the part of the analysts, they provide successful effort and method on how to treat the changing prices of oil. Through their initiatives, the economies can pulse the international market in a wide array of opportunities. The anticipated prices created a room for adjustment in for the businesses. But there are increasing number of constraints that making it difficult for the professionals to assess the changes and in return, affecting the behavior and the consistency of the performance of the economy. The inconsistency in the economy is considered as the first impact of the oil prices ( 1991). The prices of oil in the world market are a train of different consequences. Domino effect might appear and the needs for adjustment are anticipated, affecting the wages of the workforce, fare and transportation, and prices of the commodities. Higher prices lead to inflation, input costs, reduced the demand in utilizing the oil while exploiting the other inadequate resources, and lowering the oil importation. The taxation and government expenditures are also affected of the prices changes (2004; 2006). There is relative impact on the relative value of the currency. The exchange rates affect oil prices and there is a significant short run effects on the price of oil movements in the exchange rates (2006). If all of the impacts stayed in the economy, there is no doubt that there will be a declination of the economic performance due to the oil prices. Other studies stated that rising oil prices stimulate the economic growth in the exporting countries while retarding the importing economy and it is also expected in the declinations of the oil prices (2004; 2005).
Comparative case study method is the applied methodology because it is simply a case sensitive topic. Different models and measurements are needed in order to satisfy the main problem of the study. Enclosed in the past literatures are the statistical and economic theories that are all essential in building the different perspectives. It is very advantageous for the study to base all the exploration on the case studies because there are macroeconomic environment that are past of the measurement. The economy is comprised of different index that are also involved in the prices of the product that provides specific description on how the consumers, businesses, investors, and the government react in the uncontrollable changes of oil and other related products.
Analysis and Conclusion
The economic stimulus in providing oil through importing is very common. Therefore, there is a depressive effect of higher prices on economic activity in the importing countries. The importers are only following the prices of the exporters. If the prices became higher than expected, there would be a loss of consumer confidence for they are striving to look for other options. The responses are different but as long as the oil prices are high and unstable, the economic prosperity of oil-importing countries, especially the developing countries will remain at risk.
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Dawson, J., 2006. The Effect of Oil Prices on Exchange Rates: A Case Study of the Dominican Republic. The Park Place Economist, Vol. 14. [Online] Available at: http://www.iwu.edu/economics/PPE14/Dawson.pdf. [Accessed 04 Feb 2010].
Iledare, O., & Olatubi, W., 2004. Effects of Changes in Oil and Gas Prices and State Offshore Petroleum Production on the Louisiana Economy, 1969-1999. Coastal Marine Institute. [Online] Available at: http://www.gomr.mms.gov/PI/PDFImages/ESPIS/2/2997.pdf. [Accessed 04 Feb 2010].
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