Gas Price effect on the economy - Essay Example

Gas Price Effect on the Economy Economy is defined by dictionary as a Careful, thrifty management of resources, such as money, materials, or labor. It is a system or range of economic activity in a country, region, or community (Definition of Economy, 2009). The economy is affected by numerous factors that are influenced by the consumption of goods and services. Our consumption of the goods and services greatly affects the wealth, jobs, and overall economy of the country. Economies of countries differ in the pace of evolution.

Some develops faster and stronger than the others. Other factors can also be influence by the policies of the government, industry, technology, raw materials, and environment. The prosperity of the economy rises and falls with these factors, and one of these factors is through the industry of gas. When we talk about gas, it is inseparable with oil industry. Oil and gas industry is considered to be one that holds a stronghold in the world and America’s economy today. Oil and gas industry greatly affects the economy.

The economy receives an improvement when there are large reserves and an increase of active drills in respect to oil and gas. People are able to consume more if the price of gas and oil falls. According to Perner (2008), the current gasoline prices are likely to have a large impact on consumer spending but a much smaller impact on the amount of gasoline purchased. Instead, the effect is likely to be felt in other areas of spending such as vacations, entertainment, electronics or eating out. Barbara Hagenbaugh (2007) stated in her report that economists believe that rising gas prices hurt but its impact is fairly limited.

Such that drivers may be griping about record high gasoline costs, but the recent surge in the price at the pump will have little impact on most consumers and will be hardly noticed in the broad economy, say several economists, including those at Standard & Poor's, LaSalle Bank and the Federal Reserve Bank of Dallas (Hagenbaugh, 2007). However, even if rising gas prices affect the economy, the rising income will help offset it. But although gas prices are at extraordinary levels, not adjusted for inflation, the price gains have come over a number of years, giving consumers time to adjust their budgets (Hagenbaugh, 2007).

Our world today is driven by the industry of gas and oil. People use gas and oil for so many different things. This affects the rise of the Gross National Product or GNP for the consumer. Significant fluctuations in inflation of oil and gas affect economic growth. Even if we try to look throughout the history, we can really see that economies of the countries have been greatly affected by this major industry especially when there are significant fluctuations. This is the reason why our government formulates regulation to come into play in times of crisis.

As long as we drive cars that are fuelled by gas, oil and gas industry will always be a strong factor in determining the increase of a countries economy. In line with this, countries need to look within themselves for managed growth in order to make sure their economies if gas is what sparks their economy. The leaders of the country should devote themselves to the growth of gas industry. The citizens or consumers too, should be aware that their consumption of gas plays an important role that will affect economy as a whole.

When all parties are dedicated to the improvement of their country and to the industry, then consumption towards oil and gas will be reciprocally advantageous for the country and its people. References: Hagenbaugh, Barbara (2007). Rising gas prices hurt, but impact 'fairly limited', economists say. Retrieved April 23, 2011 from http://www.usatoday.com/money/economy/2007-05-22-gas-price-impact_N.htm Perner, Lars (2008), Gasoline Prices, Consumers, and the Economy. Retrieved April 23, 2011 from http://www.

consumerpsychologist.com/gasoline_prices.htm The Definition of Economy (2009). Retrieved April 23, 2011 from http://www.sayeconomy.com /definition-of-economy/