Do you think Gas prices in the U.S. will have a long term effect on the economy?

Answer 1

The economic law of supply and demand is one theory used to explain this problem.

The current situation has come about by a higher demand for fossil fuels by the emerging economies of the third world. China is fast becoming a major user of fossil fuels; their booming economy has put upward pressure on the price for fuel.

To balance this, higher prices for fossil fuels also increases the demand for cheaper substitutes. As soon as producing alternative sources of energy becomes more profitable than producing fossil fuels you can be sure that companies will jump all over the opportunity.

During this transition however, I would assume that the economy might experience some switching costs. The U.S. economy might experience some short term slowdown due to the high price of fuel however, it is imperative the the price of fossil fuels remains high so that consumers demand more alternatives.

As long as government does not intervene to keep these prices artificially low, the economy should pass through this transition relatively quickly and with low long term negative impact.

Keep in mind, this is a tentative theory and subject to many environmental contingencies.

Answer 2

the authorities can no longer administration the reporting on the cost of a unmarried commodity consisting of gas, yet they can administration the way inflation is measured. as an instance, power prices are not any more lined in figuring the change in the client cost index and neither is housing prices. certain grocery products consisting of milk are not any more lined. real inflation using an finished market basket in extremely regardless of the upward push in cost for gas. in case you do not trust it use a newspaper from 2001 and evaluate costs to an same products at present.

Answer 3

The causes of the sharp increase in gasoline prices during past year and a half are several.
(-) the rise in the price of oil to over $70 a barrel; and that increase is in turn primarily the result of rapid growth in demand for oil by China (now the world's second-largest consumer of oil) and India, a growth that has outpaced supply.
(-) lack of unused capacity in oil refineries that makes it difficult to increase gasoline production.
(-) Since refineries pollute and are generally unpleasant to have in one's neighborhood (the NIMBY, or Not in My Back Yard, mentality), political opposition prevented any new refineries from being built in the United States since the 1970's. We are reaping the consequences of that opposition.

The notion that this represents a crisis--that the world is running out of oil--is ridiculous.

Short Run
In the short run, with demand rising faster than supply, price rises steeply, producing "obscene" profits since roughly the same quantity is being sold at higher prices. In the longer run, consumption falls as consumers search out substitutes; supply rises as previously uneconomical sources of oil become economical; and so profits fall back to a normal level. The rapidity of the increase in gasoline prices has made it difficult for many consumers to adjust by altering the amount of their driving; demand tends to be inelastic in the short run.

Long Run
Most of the other economic consequences of higher gas prices are beneficial to a world concerned about an over-dependence on Middle East oil producers. They induce consumers to drive less and to shift toward more fuel-efficient cars. They encourage politicians to worry about why American refineries have not been built for over 30 years, and to remove some of the regulatory obstacles. High oil and gas prices encourage the hunt for additional sources of oil in shale and tar pits, and give researchers greater incentive to search harder for alternatives to the gasoline-powered internal combustion engine, such as electric powered engines, fuel cells, ethanol, and other alternatives.

Closing Remarks
The real cost of gasoline, adjusted for changes in the price level, is less than in 1981. Since a typical family has a higher real income than it did 25 years ago, the burden of high gas prices is easier to bear now than at that earlier time. The higher price will pinch for families who commute long distances to work in their SUV's, but the price of gasoline does not have a major effect on the many poor families who take public transportation to work.

Answer 4

absolutely: the higher we raise gas prices, the less people use cars, and the more people use public transit lines

Answer 5

Let's hope so. Maybe then we can follow through with safer ways to power our cars that wont hurt the environment!

Answer 6

No. It didn't during Carter's term.

However, this will teach us to conserve more and assist us in pushing for a better energy policy.

Answer 7

I think so, because our economy depends on oil too much.

Answer 8

It will get the Republicans out of office.

Answer 9

Yes I think it will lead to new energy sources.

Answer 10

YES it's making me travel less! and cough up more money