We have been discussing in class how government regulation and laws affect business, but in this case it is a monetary policy which is affecting the oil industry. According to a recent Wall Street Journal article, after the recent recession, the Fed worked to buy Treasurys in order to stimulate the economy. This action weakened the value of the U.S. dollar, causing gas prices to rise shortly. The most recent increase in gas prices will not last long, analysts say. Prices are still far below the record highs in Summer 2008. As crude oil prices lower because China and other investors have come back to using the dollar, the gasoline prices might soon fall as they usually follow the trends of crude oil by a few days. Obviously, an increase in production might decrease the effects of oil prices.
I find it very interesting that the trading of currency and the practices to stimulate the economy had an effect on the oil industry. I think it just goes to show that industries and the economy in general is extremely connected in many ways. The rise in gas prices reminded me of the talk about how due to the higher prices, especially in 2008, people were driving less, reducing pollution. As we have been talking about the government can have effect on an industry through regulations, I am curious as to how purposely raising prices of gas might affect the industry. I am unsure if the U.S. would ever do this though, as the free market economy seems to be a ideal very ingrained in our nation.
http://online.wsj.com/article/BT-CO-20101119-711279.html?mod=WSJ_Energy_middleHeadlines
- Caitlin McGonnigal
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