Economics and Fuel Prices
- Type of paperEssay (Any Type)
- SubjectLogistics
- Number of pages2
- Format of citationNot Applicable
- Number of cited resources1
- Type of serviceWriting from scratch
Please see attachment for instructions. Please use PowerPoint Attached to complete essay.
Economic System Called Capitalism POWERPOINT
Answer
ECONOMIC AND FUEL PRICES
This paper will discuss the rising prices on fuel over the past few years. It will involve the trucking industry and explain how the rising of gas prices has affected trucking company. Crude oil prices have passed over one hundred dollars a barrel. This has affected many independent owners-operators. This article will discuss why some independent owners have decided that it is no longer profitable to drive a truck. Some owners have decided to take a different approach with the rise of crude oil. The article will discuss how some owners have reduced horsepower in the engines of their trucks in order to increase profit and have also choice to run day routes in smaller trucks. The rise of crude oil has also affected the sales of trucks. With companies not buying or spending as much on a truck has hurt the economy. High diesel prices are a consequence of capitalism.
The top five Oil and Gas companies are: Saudi Aramco, Gazprom, National Iranian Oil Company, ExxonMobil and Petro China. These company work together by using some sort of scare tactic in order to raise fuel prices. Take ExxonMobil for example, these companies have combined forces in the United to States. These companies tell the American people gas prices went up due to the fact that their oil refineries are under being maintained. As a result, gas price increases. Where as in the 1990’s when these were two separate companies, they had to compete with each other and prices were much lower.
As the prices of fuel prices continue to increase the cost of moving goods also increases. Trucking industry owners are forced to incur great losses through this increase in expenses. To cub this they are forced to increase the goods that are to be sold to the customers so that they can cater for the ever increasing cost of fuel prices. This puts the average citizens at a tough end since they are forced to spend more their expenditure. This in itself causes a lot of inflation on the cost of majority of the items since a lot of products require fuel to transport.
With the continual fluctuation in the price for fuel, trucking industries companies are forced to re -strategize their operations to ensure continued profit, and avoid any potential drawbacks. The effects on the trucking industry and the rise in the transportation costs have caused some enterprises to start keeping more inventories on hand, minimizing the amount of transportation necessary. Less often, larger goods shipments can be more cost effective than frequent smaller shipments. This may save the receivers and shippers money, but causes yet another negative effect on the trucking industry. Reduction in shipment frequency increases the number of empty kilometers driven by a driver. The more shipments a carrier can make in a given route the more profitable the trip to the trucking enterprise
Another negative effect of fuel costs is rapid change and price volatility. Generally, trucking industries companies generate fuel surcharges based on the fuel prices of the previous week. When the price of fuel rises rapidly, there is a deterioration between the price of fuel and the fuel surcharge rate. This deterioration has a huge effect on the trucking industry earnings. However, when the price of fuel decreases rapidly the opposite is true, and a higher profit is made. Unfortunately, the latter occurs much less often. Fuel prices and their effects are a permanent part of the trucking industry. It makes competition prominent among trucking industry enterprise.
Vehicles that consume minimal amount s of fuel are used as a means of reducing the fuel consumption when there is a fluctuation in the oil prices. This sometimes means a reduction in the number of goods being supplied to customers since the vehicles that consume the minimum amount of fuel are usually small in size. This to some extent causes some losses to the trucking industry since less of the product are supplied to the customers. Smaller vehicles during the transportation of goods by the trucking enterprise means the smaller vehicle have to make more turns to transport the required goods to the customers This is somewhat tiresome to the drivers of the trucking enterprise since goods that could be transported once are forced to take several turns before they are delivered to the customers
During the fluctuation of fuel prices, trucking industries are forced to reduce the distance that is covered. This is because a longer distance in transporting the goods means a higher cost in terms of the expenses. Therefore, supplies to far distances are reduced so that the trucking industry could maximize their profits by reducing its expenses to the minimum possible. Shorter routes are used as a means to reduce the expenses by the trucking industry. Since a shorter route means a reduction in the expenses of the trucking enterprise.
When fuel prices fluctuate this causes the fares to hike. Passengers are forced to pay more than the usual amounts of fare. This is done by the conductors of public vehicles so that they can be able to cater for the higher prices fuel. This makes the passengers to spend money that they could spend on other item to be spent on fare causing a disarrangement in the budgets of people. This also causes the average citizen to squeeze their budget to the possible minimum so that they can be able to cater for the hikes in fare.
When oil prices fluctuate downwards the oil prices comes down and the profits in the trucking industry increase. Prices goods also decrease due to a reduction in the transportation cost, thus average citizens cost of living decreases. Trucking industries are also able to make large amounts of profits during the reduction in the prices of oil since the costs to transport goods and services are reduced. This causes a high rate of growth in the trucking industry.
With lower fuel prices this means low charges of fare to passengers. This allows passengers to move with ease with no worries of spending beyond their means since the fare that is charged is easily affordable to the citizens. This also increases the rate at which people travel from one place to another since they are not worried about higher fuel prices. This leads to an increase in in business activities in a country thus causing a lot of revenue to the country.
Lower fuel prices also mean drivers will make few turns in delivering the goods. Most of the goods are also transported to their destination causing an increase in profits in the trucking industry enterprise. The normal vehicles are used since owners are assured of profit since the fuel price is favorable.
In conclusion the fluctuation of fuel prices can drastically affect the trucking industry negatively. Thus, stringent measures need to be taken to ensure the effects of fluctuating fuel prices do not hit the trucking industry hard.
References
Neely, Christopher J. “How Much Do Oil Prices Affect Inflation?”. Economic Synopses, vol 2015, no. 10, 2015. Federal Reserve Bank Of St. Louis, doi:10.20955/es.2015.10.