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10 Ripple Effects of Surging Oil Prices Outside the Pump

Gas Pumps

Currently, oil prices are high. To an extent, this is because of the recent Russian invasion of Ukraine, but mostly because prices have been rising spectacularly and regularly since Joe Biden took office. However, it is important to note that there were factors driving oil prices towards this direction even before that. For example, the demand for oil has recovered from the fall caused by the COVID-19 crisis. Similarly, the supply of oil hasn't caught up with the demand for oil. As such, oil prices are high. Furthermore, oil prices are expected to remain high for quite some time to come. Unfortunately, that means ripple effects for a wide range of products and services.

1. Transportation

Enormous progress has been made on electric vehicles. However, it is important to remember that electric vehicles are far from being capable of replacing their conventional counterparts for a number of reasons. For example, electric vehicles are still expensive, which will remain one of the biggest factors holding up their replacement of their conventional counterparts for the foreseeable future. Similarly, while electric vehicles run on electricity, they won't be free from the influence of oil prices so long as that electricity is still produced using a mix of fossil fuels, renewables, and other sources of power until fossil fuels have been phased out. On top of this, there is much more to transportation than just consumer vehicles, which have been receiving the bulk of the interest. As such, this means that transportation is still impacted by oil prices to a huge extent. Unfortunately, that means that pretty much everything is affected. After all, the overwhelming majority of the things that we consume aren't made by ourselves. Instead, they are made by other people before being transported by other people, meaning that higher oil prices are increasing the costs at every step in this process. This is particularly true because most supply chains aren't 100 percent local. Instead, they can extend very far, thus intensifying said effect.

2. Food

Food is an excellent example of how higher transportation costs can make for higher prices. Simply put, most of us live at quite some distance from the places where our food is produced. There are various efforts to increase the amount of food produced in cities through vertical farms as well as other initiatives. Even so, most food is produced outside of the cities, meaning that most food needs to be transported to the consumers. Of course, it is also worth mentioning that a lot of the food that we eat don't just come from nearby regions. Instead, they are produced in either other parts of the country or other countries, both of which mean more transportation and thus more transportation costs. Besides that, oil prices impact the production of food itself. We are very far from the days when the production of food was reliant on human power. Nowadays, oil prices have a huge impact on the costs of operating farm equipment, which means an increase in the costs of food production. There are situations in which companies will soak those costs on their own. However, the chances of that happening during a prolonged period of increased costs aren't very good, meaning that consumers can expect to be the ones to pay for those.

3. Clothing

Clothing get affected in the same ways as a lot of other products. For example, clothing needs to be transported, so higher transportation costs mean more expensive clothing. Similarly, clothing needs to be made using machines, so higher operating costs mean more expensive clothing as well. Besides these, there are some clothing made using oil. That can sound rather strange. However, it is very common for clothing to be made out of polyester either in whole or in part. Strictly speaking, polyester encompasses a wide range of both natural and synthetic materials. In general use, it tends to refer to polyethylene terephthalate. This material can be turned into fibers for clothing and other products. Furthermore, chances are good that interested individuals have come upon it in other forms as well, seeing as how it sees a lot of use for plastic containers. In any case, the important point is that higher oil costs can mean higher material costs for clothing.

4. Personal Care Products

Generally speaking, oil isn't exactly the kind of thing that one would want to put either on one's skin or in one's mouth. However, there are numerous kinds of materials that can be made from oil, which can turn up in an even more numerous range of products. Surprisingly, that includes a lot of personal care products. For example, toothpaste contains a petroleum derivative that is meant to help oil-based ingredients dissolve in water. Similarly, dry shampoo is made possible by liquified petroleum gas, which is pretty much exactly what it sounds like. The packaging for personal care products make plenty of use of petroleum products as well, though some more than others.

5. Medications

Speaking of which, petroleum products can turn up in our medications as well. For instance, interested individuals should be familiar with aspirin, which is acetylsalicylic acid. Historically speaking, acetylsalicylic acid was synthesized using salicin from meadowsweet. Nowadays, the starting material for the production of aspirin is benzene. Said substance is converted into phenol. After which, the phenol is turned into salicylic acid and then acetylsalicylic acid. Some people might wonder where aspirin manufacturers get the benzene. If so, the gist of it is that benzene is a hydrocarbon that can come from more than one source, with the most common being petroleum. In other words, whenever someone takes an aspirin, chances are very good that it was made using a material derived from oil. Naturally, higher oil prices mean higher material costs for such medications.

6. Plastics

Plastics are one of the ways that higher oil prices affect us the most. After all, they are made using fossil fuels. Furthermore, plastics are absolutely everywhere. Interested individuals should have no problem naming multiple places where plastics can be found in their day-to-day-lives. One excellent example would be the packaging for the products that they consume. Some beverages are packaged using either glass or paper but there are plenty of beverages that are packaged using plastic of one kind or another. Another excellent example would be the materials used to make the products themselves, which cover a remarkable diversity of things. Simply put, many of the containers made for kitchen storage purposes are made using plastic. Simultaneously, the computers, the smartphones, and the other electronics that we use on a daily basis are often housed in plastic shells as well. Plastics are extremely convenient, particularly since they come in so many forms with so many properties. As such, their presence in our lives is ubiquitous.

7. Heating and Cooling

The northern hemisphere has emerged out of winter. However, it won't be too long before it enters into summer. At which point, there are going to be a lot of people relying on their cooling systems to continue living comfortably. Both heating and cooling need to be powered in some way. These sources of power don't need to be based on fossil fuels, which should be clear to anyone who has ever kept cool by hand-fanning themselves. Still, there can be no doubt about the fact that they tend to be connected to fossil fuels in some way. Sometimes, they are just directly powered by one kind of fossil fuel or another. Other times, they are powered by the electricity grid, which as mentioned earlier, is kept going by a mix of fossil fuels, renewables, and other sources of power in most places. Combined, this means that heating and cooling are greatly impacted by oil prices and vice versa. Indeed, there is a reason that oil prices have a seasonal swing to them.

8. Housing

There are already people speculating that we could see higher housing prices in the not too distant future, which is impressive considering that they are already quite high. Currently, the demand for housing already outstrips the supply of housing, particularly since the construction industry is apparently struggling to keep up in certain places. Thanks to that, there is more competition for each unit of housing, which means that the prices get driven up more than otherwise possible. Higher oil prices won't be very helpful in this regard. They might not have much of an effect on the existing supply of housing. However, they can definitely have an effect on the amount of housing that will be added to it because of their effects on construction costs. Simply put, higher oil prices mean higher construction costs because of a number of things. One, they increase the cost of operating the machines used to build houses. Two, they increase the cost of the construction materials. Three, they increase the cost of transporting the construction materials to the construction site. This situation promises to make for more expensive construction costs, which will be passed on to consumers in the form of more expensive housing.

9. Online Shopping

One of the reasons that people choose to shop online is the ability to get a better deal on goods than what they can find in their local stores. Unfortunately, chances are good that higher oil prices will be hitting this as well through a couple of ways. For starters, there are a lot of goods whose prices are going to go up because their production costs are going to go up. This is true if those goods are sold in brick-and-mortar stores. Similarly, this is true if those goods are sold through online websites. Furthermore, while there are some goods that can be delivered over the Internet, the same can't be said for most goods out there. Instead, they need to be transported to the warehouses of the retailers selling them. After which, they need to be transported to the customers. That is a lot of transportation, which in turn, means a lot of transportation costs.

10. Vacations

Vacations were already expected to be more expensive. However, higher oil prices promise to make them more expensive still. Fuel costs make up a sizable chunk of an airline's costs, so much so that it isn't uncommon for them to make up 20 to 25 percent of an airline's annual operating costs. Unsurprisingly, higher oil prices mean that those are going to increase, which in turn, means that at least some fraction of them will be passed on to customers in the form of higher airfares. Interested individuals might be tempted to go on vacation by some other means of transportation instead. If they do, they are going to face the exact same issue because higher oil prices hit every single kind of transportation they might use. Considering everything that is becoming more expensive, it seems very likely that a lot of people will be pushing their vacation plans further into the future while they tighten up their budgets.

What Are the Solutions to This Problem?

There isn't much that interested individuals can do about this problem on their own. After all, oil prices are a matter of national and international politics, so this is something that people are forced to plan around. As for what can be done to stablize oil prices, well, that gets real complicated real fast, particularly since there is a lot of misleading information being tossed about. In the long run, switching over to renewables would do a lot to reduce the impact that oil prices can have on our lives. It isn't a perfect solution, particularly since it wouldn't eliminate the use of oil altogether. However, the fundamental fact of the matter is that oil prices are extremely sensitive to global events because the oil market is global in nature. That is a problem because there is always something going on around the world that can sway oil prices one way or the other.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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