I was on Twitter a few minutes ago and my feed was full of people talking about the fall in petrol prices, some of them were talking about consequences in the dollar rates and I don’t understand at all. How does the petrol price affect world economy? And how does it affects all of us non billionaire people?
In: Economics
A LOT of industries are tied to oil/petrol prices. It is also a huge commodity market, so a lot of people/businesses/markets “own” [read: invest in] oil.
On one hand, the biggest expense an airline has is fuel. One of the top expenses of shipping companies is fuel costs (for trucks). When producing just about any tangible product, shipping costs are a factor. If gas prices double, then it costs more to ship basically everything that isn’t freight (trains are ridiculously fuel efficient over long distances). It also costs more to commute to work, so you are personally invested even if you don’t own a company.
Right now we have the opposite. We have tons of oil, and NO ONE is buying; they also tanked the price of oil on purpose but that is another post all together. Basic economics states as surplus goes up, prices go down. What if your company had previously “bought” [read: invested] $100,000 shares of oil, and now that same oil was worth half that?!? If you had to liquidate, then you’d lose half your investment.
**Now scale up either of those outcomes.** It isn’t just your business that has to pay higher shipping costs. It is everyone. Or it isn’t just your stock portfolio that has investments in oil, it is everyone’s retirement account.
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