Why, when oil prices continue to rise, is the economy still stable?

Question

The high price of oil in the 1970's fuel shortage was cited as one of the leading causes of inflation, yet in recent years oil prices have gone up a lot, but with little inflation. What is different now that is keeping inflation in check?

Answer 1

The simple answer to your question is that Americans spend only a small portion of their budgets on energy. The U.S. economy has become far more energy efficient in the last 30 years. We use more total energy, because the economy and population are far larger than in the 1970s, but we use far less energy-per-dollar of GDP.

For me for example, gasoline cost me just about exactly 2% of my monthly gross pay. If gas was still at its prices of 3 years ago, it would be 1% of my pay. Not much difference, especially since I make nearly 3 times as much money now as I did three years ago.

One example of why is that we no longer use oil to generate electricity. Oil-fired power plants were common in the 1970s, but nowadays all new plants use coal, natural gas, and various other things, but not oil.

Another reason for the efficiency is that the U.S. economy is much more service-based than in the 1970s. Rising fuel prices affect the embedded costs of many manufactured goods (though companies may not be able to get away with raising prices, so inflation is not automatic) -- but if you go to a tax accountant, or a financial advisor, or a barber, or a doctor, or a lawyer, fuel prices have ZERO impact on the cost structure of the service. Today more of the economy is represented by those kinds of services.

Answer 2

You have become desensitized to it.....

The FED has tried to control, more aggressively, the rate rate of inflation but never-the-less it is still there. Oil is rising but, the refineries are the ones that will truly effect the cost of petroleum products in the end. Oil and its products are the base for so many of our daily products that it is only a matter of time before inflation is uncontrollable. Jobs and wages have been held in check for so long and our dollar is becoming so week, due to the FED flooding the world market with the dollar, that we will soon lose our buying power. It is going to be a slow death and we are powerless to stop it right now.

Answer 3

Have you been to the grocery store lately?
Inflation IS a reality.
Oil prices have NOT gone up on a world wide basis. The prices are going up HERE because the U.S. dollar is falling in value relative to other currencies.
Keeping salaries low helps keep costs low, but that will be reflected in lower purchasing power.
Just wait, you'll see what I am saying shall come true as the effects gradually work their way through our economic structure.
A side benefit of the lower dollar value is our products become cheaper and, as exports, easier to sell in other nations. Imported items become more expensive making domestic products more attractive to American consumers.

Answer 4

Nope , u . s . a . of america would not administration the fee of OIL .. OPEC does and that's a team of OIL international locations not purely u . s . a . of america and Politicians ( Dem & Rep ! ) make too a lot money off the fee of oil and gas to ever do any element that ought to truly help the individuals .