Macro Economics - Oil and Gas
Reagan Moore
Martinez
Macro Economics
June 30, 2013
Oil and Gasoline Prices in the US Oil and gasoline prices follow a trend that sparks mixed reactions from different industry stakeholders in the America’s economy. The trends on oil and gasoline and their stability have immense impact on the performance of the economy based on their primary as energy. The government’s ability to ensure stability in price movement is seen as a key step towards fostering steady economic growth. A variety of factors are at play in the determination of these trends exhibited by the oil prices in America. Some of these factors are attributable to the market forces and understanding them would be instrumental in resolving economic problems resulting from the surging oil prices. In 2011, oil prices were reported to have reached a record high placing the rise of Brent crude oil’s price at 70% relative to expected market prices (Yellen 1). Although the oil price increase was coupled with a rise in prices of non-fuel commodities, its high increase can be viewed as an indicator of the oil prices instabilities, which would be detrimental to the economy. Confirming the normal trend in oil prices, a report by the US Energy Information Administration (EIA) has revealed a rise in oil and gasoline prices in the onset of the year 2013, which suggested that the rise was not to be viewed as abnormal (US EIA 2). While oil prices began rising in December 2012, its only been attributed to a new phenomenon in market behavior that usually characterizes the first half of every year. Oil prices push inflation rates a notch higher during the seasons characterized by the price surges. Echoing the Federal Open Market Committee’s Report, 2011, Yellen affirms that the consumer inflation rates increased reflecting the high oil and gasoline prices that were experienced in the season (Yellen 1). This inflationary force is characterized by increased transportation costs, reduced discretionary
Martinez
Macro Economics
June 30, 2013
Oil and Gasoline Prices in the US Oil and gasoline prices follow a trend that sparks mixed reactions from different industry stakeholders in the America’s economy. The trends on oil and gasoline and their stability have immense impact on the performance of the economy based on their primary as energy. The government’s ability to ensure stability in price movement is seen as a key step towards fostering steady economic growth. A variety of factors are at play in the determination of these trends exhibited by the oil prices in America. Some of these factors are attributable to the market forces and understanding them would be instrumental in resolving economic problems resulting from the surging oil prices. In 2011, oil prices were reported to have reached a record high placing the rise of Brent crude oil’s price at 70% relative to expected market prices (Yellen 1). Although the oil price increase was coupled with a rise in prices of non-fuel commodities, its high increase can be viewed as an indicator of the oil prices instabilities, which would be detrimental to the economy. Confirming the normal trend in oil prices, a report by the US Energy Information Administration (EIA) has revealed a rise in oil and gasoline prices in the onset of the year 2013, which suggested that the rise was not to be viewed as abnormal (US EIA 2). While oil prices began rising in December 2012, its only been attributed to a new phenomenon in market behavior that usually characterizes the first half of every year. Oil prices push inflation rates a notch higher during the seasons characterized by the price surges. Echoing the Federal Open Market Committee’s Report, 2011, Yellen affirms that the consumer inflation rates increased reflecting the high oil and gasoline prices that were experienced in the season (Yellen 1). This inflationary force is characterized by increased transportation costs, reduced discretionary
Cited: Federal Reserve District. “Current Economic Conditions.” Federal Reserve Systems. (2013): Web. 27 June 2013. US Energy Information Administration (EIA). Petroleum & Other Liquids. EIA, 2002. Web. 27 June 2013. US Energy Information Administration. Today in Energy. EIA, 2013. Web. 27 Jun.2013. Yellen, Janet. “Commodity Prices, the Economic Outlook, and Monetary Policy.” Federal Reserve Systems. 11 April 2011. Web. 27 June 2013.