Oil & Price Inflation

OIL & PRICES

INFLATION

MACRO ECONOMICS

What is Inflation?



Inflation is a sustained increase in the general level of prices of food and services,

measure by the CPI (Consumer Price Index)



Causes for inflation in a economy:









Demand and Supply

Government Intervention

Internal & External Sources

The rate of inflation depends on the earnings the unit labor of costs, productivity,

prices, and taxes of imports.

Affects the balance

of payments position

Diminishes the value

Higher unemployment

Of money

People change

& purchasing power

living standards

INFLATION

CONSEQUENCES

Reduction in

trend growth

Deterioration in

global

competitiveness

Potential macro-economic

impacts of oil inflation



Reduction in oil demand where prices are passed through to consumers



Incentives for energy suppliers to increase production and investment



Trade deficits due to higher cost of exports



Volatility in equity and bond valuations, and in currency exchange rates due to changes

in economic activity, corporate earnings and monetary policy

Inflation Rates Graph

US (2001-2011)



In 2008 was the year with the lowest inflation percent of .1%

 Between 2009 and 2010 there was a 1.2% decrease

 As of March 2011 there has been an increase of 1.2%

*Calculated by the Consumer Price Index

US INFLATION RATE

US OIL PRICE INFLATION





The red line on the above chart shows oil prices adjusted for inflation in April 2011 dollars

The black line indicates the nominal price (the price you would have actually paid at the time)

Increase in oil price has made

food more expensive



Oil prices started to impact on the selling price of refined products





Rose about 10-15%

The increase in oil prices has driven the price of plastic packaging



Rose up to U.S. $ 30-70 per ton



A recovery program intends to address this problem, as it is...