Priced in excess of $120 per barrel, oil prices today are about three times the amount from what they used to be four years ago. The result of an explosion in demand unsatisfied by adequate supplies, the surge in oil prices has hit consumers in many ways.
To understand how oil prices today can affect your lifestyle, it is important to examine the effects of increased oil prices on the lives of the average consumer.
The most immediate consequence of high oil prices would be a dramatic increase in fuel prices. Most fuel used in motor vehicles is derived from crude oil. Any increase in crude oil prices would therefore lead to increase in prices of fuel. In another words, you now have to pay more when you visit the gas station to top up fuel in your car as you would require more money to purchase the same amount of fuel. This would in turn increase your cost of transportation. The cost of commuting by car would therefore increase as a result, especially if you drive to work on a daily basis.
Moreover, an increase in oil prices would result in a general increase in inflation across the economy. It is important to note that oil is an important factor of production required to power up machinery. An increase in the price of oil would increase the cost of operating these machines which are important for production.Given such a situation, producers would have little choice but to pass on this increased costs to consumers by increasing the prices of goods and services provided, in order to maintain the same level of profitability as before. As such, for the same amount of money, consumers must now buy lower quantities of goods and services, thus increasing cost of living.
Moreover, the price of electricity would also increase in response to increased oil prices. In many countries, oil fired power stations are still very much prevalent. An increase in oil prices would mean that the cost of operating these power stations would increase substantially as these stations require oil as a fuel in the generation of electricity. This would often be passed on to the average consumer as higher electricity bills each month, which in turn would spell hardship for those living on the edge of poverty. This group of individuals would then not only need to cope with the rising cost of goods and services, but also more costly electricity bills.
It is clear that the high oil prices today do indeed have a multifaceted impact on our daily lives. While consumers who drive may be the worst hit, other groups of individuals are not spared as they have to contend with inflation and more costly electrical bills. Yet, while the average consumer has no control over the direction of oil prices, he would be able to generate savings by saving energy. One good example would be walking instead of driving when going to nearby places and turning off the lights after use. Such measures would thus enable the average consumer to cut down on his spending and save money.
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