Economic Effects of Higher Oil Prices Upon U.S. Households Research Paper

Economic Effects of Higher Oil Prices Upon U.S. Households - Research Paper Example dollar spent, ultimately passing the savings on to consumers. Likewise, when the value of the dollar is low against foreign currencies, something that can happen with sinking interest rates, U.S. dollars buy less oil than before. This, of course, can contribute to oil becoming costlier to the U.S., which consumes 25% of the world's oil (Are oil prices and interest rates correlated?) At the same time some people believe that oil price rise may decrease the automobile use and the decreased automobile use may decrease the demand for oil. In such circumstances, the oil producers may force to decrease the prices of oil. However, the above argument seems to be illogical since oil is a nonrenewable energy source. Oil producing countries definitely know that people cannot avoid the use of their own vehicles for a long time and they will be forced to use it again in the future when they realize that the alternate options are inconvenient. In fact oil companies produces more oil when the oil p rices increases and they produce less when the oil prices come down. They know very well that they will get higher prices in future because of the absence of other feasible energy sources. Dollar value fluctuates heavily in the global market because of the fluctuation in oil prices. "As the dollar declines in value, so does the price of oil in non-dollar terms," said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon. "Consequently, foreigners bid up the price of oil and other dollar-denominated commodities. The result is that the price of crude oil and other commodities rise in dollar terms as the dollar falls in value against other currencies" (Twaronite) Since United States is a superpower and one of the most advanced countries in... As the essay declares people believe that oil price rise may decrease the automobile use and the decreased automobile use may decrease the demand for oil. In such circumstances, the oil producers may force to decrease the prices of oil. However, the above argument seems to be illogical since oil is a nonrenewable energy source. Oil producing countries definitely know that people cannot avoid the use of their own vehicles for a long time and they will be forced to use it again in the future when they realize that the alternate options are inconvenient. In fact oil companies produces more oil when the oil prices increases and they produce less when the oil prices come down. They know very well that they will get higher prices in future because of the absence of other feasible energy sources. Dollar value fluctuates heavily in the global market because of the fluctuation in oil prices. According to the research findings since United States is a superpower and one of the most advanced countries in the world, most of the other countries in the world are currently associated with America in one way or other. American technology is essential for many of the other countries and there are many items exported from America to other countries. On the other hand, America’s dependence on other countries is small and therefore the bargaining power of America would be more than that of other countries.