The Effects of High Gas Prices

Essay by john_molson2003College, UndergraduateA-, March 2008

download word file, 3 pages 0.0

Gas is an important productive resource in the world. Driving cars, heating buildings, producing electricity, people all need gas. Therefore, gas is directly related to people's normal life and the global economy. Recently, due to the fights between Israel and the Hezbollah guerrilla, the Middle East political and economic situation has been deteriorating, which has led to the continuous hikes of gas prices. Since gas plays an important role in our economy, people should understand that the high gas price does not only mean people need to pay more for driving their cars, but it also leads the pervasive inflation, the change of people's consumption habits, and more seriously, the recession of the global economy.

First of all, the rising prices of gas, a critical input in almost all production processes, will trigger the price hikes of most consumer and industry products: the inflation. For example, after the gas price increases, the costs of transportations also increase.

Raw materials need to be transported into factories before they become final products; all final products need to be transported to retail stores where consumers can buy them. Therefore, the increasing costs of transportation will directly be added in the prices of consumer products. Moreover, the high gas prices generally are led by the high crude oil prices, and the crude oil is the raw material of most important chemical products such as nylon and synthetic polymers, which are inputs of most industry products. Consequently, the hike of the crude oil price also leads the rises of the industry product prices. The pervasive inflation is inevitable.

Influenced by the inflation caused by the high gas prices, people's consumption habits will gradually change. With the rising gas prices, people will reduce the times of long-distance travel by driving their cars, and they will more...