Good Macro-Economic Influence Of Dropped Oil Prices Essay Example

The drop of the oil prices in the recent past has far reaching economic implications on the globe. One of the fundamental facts is that energy is among the most significant economic drivers in the global economy. Since the oil is one of the most used forms of energy, the prices of the oil would affect various aspects of the economy.
Alex song (2015) noted that reduced the prices of oil leads to more money for discretionary spending. Such means that the citizens would benefit from the lowered prices to save more. Once citizens safe more, they tend to consume more of the other goods in the economy. Demand and supply of good may increase in the countries. For example, if the flight fares go down and that people have saved more, the demand for flying would increase.
Country’s that import crude oil such as China and Japan, and South Korea are the primary beneficiaries of the reduced oil prices. A drop by as little as $1 translates to billion in such countries. The government and can increase its consumptions of other global good i.e. the country due to the reduced oil prices may venture into other global economic activities that previously could not be possible due to the high cost of petroleum.
On the other hand, the oil producing countries faces an economic crisis especially if the country’s economy is oil-driven (Clifford Krauss, 2015). The reduced prices reduce the overall income in the countries. Therefore, the state may reduce its imports significantly since it has little fiancés to do so. The economy stability of such states may destabilize until the prices of the oil stabilize.

References

Alex Song (2015). How Will The 2014 Drop In Oil Prices Affect The World Economy And Geopolitics? Forbes. Retrieved http://www.forbes.com/sites/quora/2015/01/06/how-will-the-2014-drop-in-oil-prices- affect-the-world-economy-and-geopolitics/
Krauss C. (2015, Jan 12). Oil Prices: What’s Behind the Drop? Simple Economics. The New York Times. Retrieved from http://www.nytimes.com/2015/01/13/business/energy- environment/oil-prices.html?_r=0