RISING FUEL PRICE AND IT EFFECTS ON SOCIETY

The price of oil and inflation always seems to be connected in terms of cause and effect relationship. This assumption can be deduced when there is an increase of the oil price, there must be an increase in the price of domestic goods. This direct relationship of oil and consumer products price have affected most society in terms of their spending and budgeting.

In terms of the macro economy, higher inflation rate cause with the increase in oil price deals with a low economy growth. This is due to the matter that, oils are widely used in the transportation of goods, which actually reflects on the consumption price. When the production price is high, there is a low in the supply of goods, that lead to the general increase of the consumer products price.

The first effect of the inflation is it will erodes the consumer powers. This can be proved that, when the consumer goods price increase due to the oil price, the profit gained from the demand is not sufficient enough to cover the inventory spending which lead to less production of goods.

When there is an announcement on the oil price increase for the next day, most people are spending more on the goods and they keep the money for the succeeding day. It is believed that this event  cause more inflation than before. This is due to the cash outflow, which reduce the purchasing power of currency when the people tend to keep the money for next day, rather than to spend it.

On the bright side, it is believed that inflation can reduce the unemployment. As the level of the consumer goods rise because of the increase in the raw materials like oil, the wages of the workers will decrease as the inflation hits at the certain rate. This will enable the company to hire more workers with a low budget salary - unless there is a central bank that helps on regulating the economy inflation with taking the rise or lowering the interest rate.

In conclusion, the increase of the oil price lead to the positive and negative impacts of inflation towards the society. Policy regulation, organization plan and societal behaviour plays an important role to keep the economy in balance as long as there is not a huge deficiency of the resources that inhibits from the economical development.