Monday, July 26, 2010

How does the world price of oil contribute to a rise in inflation?

Title pretty much explains it to be honest :D


It would be greatly appreaciated if someone can help me ? How does the world price of oil contribute to a rise in inflation?
I had a letter off npower this morning and it said gas and oil have risen in price by 122%. There will be a few cold people this winter.How does the world price of oil contribute to a rise in inflation?
Oil is one of the most important resources on this earth at the minute. It is used for transport, as a form of energy, etc. Therefore, when the price of oil goes up, it affects everyone.
It doesn't directly, but central banks have tended to respond to it by expanding the supply of money that they control. It is THAT which causes inflation.
Everything has to be transported (fuel) and most things have some plastic (oil).

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