Friday, July 30, 2010

Why is the price of consumer goods affected by oil prices?

A couple of reasons. All consumer goods need to be shipped to their destinations, that requires gas. Most Plastics are made from petroleum products, higher oil prices affects the basic cost of goods.Why is the price of consumer goods affected by oil prices?
Firstly, a surprising number of products are actually made from oil or oil derivatives...so are directly affected by the oil price.





Secondly, running a factory requires energy....and that energy is likely to have some oil dependency somewhere along the line...so if oil prices alter then costs alter as well....so prices have to alter.





Thirdly, transportation costs are again directly affected by oil prices....if it costs more to ship either the product or the parts to make the product then again prices have to reflect that.Why is the price of consumer goods affected by oil prices?
I think it has a lot to do with how oil prices affect the financial economy....


but in a very simple way, things need to be made in one place and distributed all over the world - costing more as a direct result of the cost of the fuel...
Transport costs, particularly by road, vary according to the cost of fuel.

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