Oil Prices Affect Almost Anything You Buy
Michalis 'BIG Mike' Kotzakolios


Defined Tag: Oil Prices.

Oil prices are perhaps one of the most important things financial analysts take into consideration when monitoring the economy. Virtually all goods and services produced rely on oil to some degree, whether it is used in the production process or whether it is used to transport the product. Whatever the case may be, whenever the price of oil rises, the price of many other things are likely to rise shortly thereafter.

The most obvious victim of the rising price of oil is the cost of gasoline. One might assume that the cost of a barrel of oil is the price to extract it from the ground, plus a reasonable profit. That is only the beginning. Each step in oil production adds to the oil price, including exploration, drilling, pumping, transportation, refining, and distribution. Gasoline can be considered a miracle liquid, because one gallon can safely propel a two-ton car 20 or 30 miles. If the price continues to climb, consumers can only continue ignoring it for so long.

The effect of crude oil barrel prices shows up in unexpected places. Increased oil costs often mean an increase in the cost of consumer goods. How are fruits and vegetables connected to the price of oil? The shipping company charges more for seeds because his trucks have higher gasoline bills. The farmer pays more to run his tractors and combines. Once again the shipping company charges more to take the crop to market because of the higher oil price. The end result is higher prices in the market.

One form of production which is particularly sensitive to changes in oil price is manufacturing. Changes in the price of oil will increase the cost to manufacture goods using oil as an energy source in production. Of course, pharmaceutical companies, companies that manufacture plastics, and even automobile manufacturers all experience significant cost increases as a result of spill over inflation from rising oil prices. In the end, these costs are passed off to consumers.