As the recovery is slowing, many economists are reducing their economic growth predictions. One economist, Bill Cheney, states that the slashing of his forecasts for economic growth is due to, "higher oil prices and higher odds of premature fiscal tightening". The steady rise in gasoline prices in recent months has acted like a tax on consumers and businesses, which has taken away from the amount of money that they can spend on other goods and services. In addition, many economists are worried about the weak housing market. Home prices are down 4.1% during the last 3 months of 2010. Robert Shiller claims that, "There's a substantial risk of home prices falling another 15%, 20% or 25% more".
6 comments:
The looming government shut-down will be another drag on the economy (http://money.cnn.com/2011/04/06/news/economy/government_shutdown/index.htm). As many as 800,000 workers will be told to stay home and many others will not receive paychecks. These events will not help the lagging growth this quarter/year.
The high oil price recently slows down the recovery of U.S economy. As the oil price does up, the transportation cost of goods and services will go up, and this will lead to a increasing in prices. And this hurt the consumer confidence in this economy.
The oil producing countries are still at unrest, so no one can predict whether or not the oil price will keep dropping. Besides, there is a delaying effect in the increase in cost in production, so prices might still have space to rise.
The oil price rise is a shock to the economy and there is really nothing the government can do about it.
I think rising oil prices may have a big impact on the transportation industry as well. People will limit their vacation traveling or turn to public transportation. De to the decrease in demand, airplane and car industry, under pressures from competition, should work on innovated engines that consume less oil or run by other alternative energy.
The rise of oil prices will undoubtedly take a toll on the economy. This is a fact, but the question is, for how long will these prices stay on the rise and how fast will alternatives to gasoline continue to penerate the market.Most major car manufacturer in the US either already have or are launching new lines of hybrid/ alternative fuel source automobiles. If this increased productivity from the new technology can help to reduce the hit from increased gas prices, it could help to dampen the negative impacts of inflated gas prices.
This does not account for cargo transport since these trucks etc. arent able to utilize the alternative fuel technologies yet.
Of course the rise of oil prices will continue to rise due to excessive demands from developing countries and other factors behind the rising price. This would affect many many goods that rely on the transportation. This is one of the reasons why we need to invest more on the alternative fuel research and find a solution. If we could somehow replace oil, we wouldn't have a problem with oil having to affect the prices.
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