Rise in Global Oil Prices Research Paper

Excerpt from Research Paper :

Because the cost associated with fueling the cars will increase, individuals might come up with ways of reducing the consumption of fuel, they will thus use public transportation. When a rise in the prices of gas results into an increase in transportation ridership, the revenues from fare are likely to rise, and the extra costs of fuel for the transport operator will be offset partly. Numerous news reports in the United States are indicating that transportation ridership has gone up with the increase in the prices of the gases; however, little research has been done to prove this association. When there is an effect on ridership, it will be fascinating to notice whether the result is short-lived or a long lived phenom-enon. Therefore, a rapid price increase is capable of resulting into a jump in transport ridership. To become accustomed to the high prices of gas, transporters might buy additional vehicles that are fuel-efficient. On the contrary, individuals may commence using transportation after a spike in the prices of gases, and their behavior may possibly transform permanently in a way that they carry on with transportation even when the prices of gas drop. It is also probable that the prices of gas might not affect ridership in similar manners for every transportation agency. Transport buses operating in longer routes, like the ones that are found in the rural areas, might be affected in a different way than the ones that are operating in the routes that are shorter. Somebody who usually travels for distances that are longer will probably be very responsive to changes in the prices of gas.

Effects of Spikes in the Price of Gasoline on Behavioral Intentions:

The prices of gasoline have highly affected the customers in North America for many years. Because of the current hurricanes taking place in Katrina and Ike beating the Southeastern United States that are the major oil producing places, present global economic crisis, and also the conflict that is going on in the Middle East, customers have been frequently exposed to the huge spikes in the prices of gasoline in the current years.

Responses of the consumer to gas spikes

Subjective evidence suggests that very sharp increases in gas prices are capable of having a considerable effect on customer behavior. For instance, approximately 75% of Americans are reporting that high prices of gas have made them to cut their total discretionary spending (White, 2008). This is rather astonishing as a recent study has exposed that customers frequently abandon financial costs connected with driving (Feiler & Soll, 2010), and are also generally not concerned about the energy cost and the results of their behaviors (Larrick & Soll, 2008). Nonetheless reports of customers calling off their travel plans that they have scheduled for long and placing much emphasis on extremely fuel efficient new cars have been widespread (Krauss, 2008).

There are several negative effects of increase in the price of oil. They are forced to change their shopping habits and lifestyles. They also default the paying of their bills as well as fueling of their vehicle therefore leaving them with very little options of commuting to work. Consumers are generally left with less expendable income.

Changes in driving habits as well as lifestyle

Consumers are forced to stay at home and eat less. Their entertainment is also affected since it becomes reduced and limited (no going to the movies). Vacations are cancelled.

The consumer shopping habits are affected

Consumers are forced to shop online in order to eliminate the cost of fueling their cars. They are forced to get rid of their fuel guzzling SUVs for more fuel efficient cars. The consumers are forced to change their jobs for ones that require shorter commute or to telecommute and not to travel at all.

Effects on businesses

Businesses have to cope with the loss of employees due to the inability to commute. They are forced to change their strategies of operations to include telecommuting. They are also forced to increase prices to cover for the increase in fuel prices. Vendors are forced to include fuel surcharge for all deliveries (Personal communication, 2008).

Larger businesses such as airlines are also hit hard by the rise in fuel prices, some go bankrupt due to huge operating losses. Other undergoes strategic mergers and acquisitions to counter the effect of rising fuel prices. Some adopt job cut policies and charging of other in-flight food and amenities. In the automobile industry, certain companies have changed their production schedules to exclude SUVs. Some have cut down some jobs. This therefore means that there is a seriously high rate of unemployment due to increasing fuel prices.

Conclusion

Rise in oil prices has devastating effects on global economy. The consequences of fluctuations of oil prices are felt in all sectors of global economy. It is important for the nations of the world to start relying on sustainable energy sources.

References

References

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Krauss, C. (2008, October 30). As gas prices go down, driving goes up. NYTimes.com.

Retrieved March 29, 2011 from http://www.nytimes.com/2008/10/30/business/30gasoline.html?partner=rssnyt&emc=rss

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Online Sources Used in Document:

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