Motor oil

As we can see, gasoline demand continues to rise each day despite the fact of high priced motor gasoline. Goldman Sachs in its Energy Weekly report stated that gasoline demand growth continues to be driven by year over year price changes which average to a modest 5% change during 4 weeks. We can observe that crude oil prices are reaching a 9 month high of $71.00/bbl. US crude inventories built 2 billion barrels due to the strong response of the refining system to the extraordinary high cracks due to the increase in demands for oil reaching 10.9 million b/d. We can suspect that the crude oil inventories are decreasing due to the high market demand from consumers. Also providing the fact that some drivers aren’t driving efficiently because in the cities, frequent stopping and starting will decrease the efficiency of gas, also driving at a moderate speed of 55 mph will help save gas. Furthermore, getting vehicles such as Jeeps, SUV’s aren’t that economically fuel efficient; therefore, causing them to spend more oil and increasing the demand for oil.

Relation to Chapter 6

We can really relate this to chapter 6 aggregate demand for goods and services. The demand for oil is continually rising due to the fact that it is an inelastic good. Consumers are usually ordinary citizens and they get their income from their workplace each month and minus tax, they will have their disposable income. However, that disposable income, there would be some that goes to paying for mortgages, loans, food, and most of all, gasoline for the car. This continue rising of the prices might also lead people into investing more into the oil industry because they expect the future prices to go up; therefore, making profit off of it. Then we can look at the psychological factor where people start to purchase cars that are fuel efficient and can save a bit of money from each month’s gasoline expense. So, gasoline prices are affecting our daily lives, and as well as increasing the GDP of the country due to high consumption. However, if the oil prices are going to continue to rise, when will it drop?

Economics Chapter 7 Blog

<<http://www.bloomberg.com/apps/news?pid=20601082&sid=aTbBweZdM51M&refer=canada>>

On May 29, the bank of Canada indicated that they would be raising the interest rates in the future due to the over inflation in the economy. The interest rate for an overnight loan would be 4.25%. The Canadian dollar are at its 30 years highest, the central bank said in a statement today in Ottawa, “There is an increased risk that future inflation will persist above the 2 per cent inflation target and that some increase in the target for the overnight rate may be required in the near term to bring inflation back to the target.”. The over inflation of Canadian dollar and the lack of U.S. demands caused workers at manufactures such as the building materials and car industry unemployed. We can see that 1 Canadian dollar can be exchanged for 93.2 cents from May 28 of 92.59 cents. We can see that the Canadian dollars are increasing by a lot, but a senior fixed income strategist at TD securities stated that, “The market is quite comfortable to see the Canadian dollar higher yet. The way they have changed their tone, we firmly think that the best move right now is July rate hike.” However, despite that inflation is pretty high already, 6 out of the 20 surveyed economist predict that it will continue to rise this year, due to the evidence of exporter’s sales are still continuing to grow. Due to the high Canadian dollars, our exports are becoming less attractive to foreign customers and US exports make up a third of Canada’s 1.1 trillion economy. Some industries start to complain about the lack of swift decision made by the government and demand the government to minimize their losses.

Relation to chapter 7

We can see that in chapter 7, we study about how to control money using different methods and one of them was controlling the interest rate through the central bank in order to guide the economy to healthy 2%-2.5% inflation. In the article above, it clearly states that due to the over inflation in the Canadian economy causing our dollars to rise rapidly almost matching the U.S. currency of 1 to 1 ratio. The central bank decided to increase interest rates in order for people to save more, and take money out of the circulation in the economy. A high currency doesn’t necessarily means that it is bad for the economy, because when your currency is high, you can exchange more for other currencies; therefore, you can buy more of the same thing with the same amount of money then before. This means that the imports would increase and more people would buy imported goods since they are cheaper. However, with a high currency, we can see that the export economy would be affected, because when foreign investors or customers want to buy things from you, they have to pay more in order to pay for the same amount of product, affecting them to buy less or maybe not even buy at all. Therefore, we need to find an effective way to keep our inflation from 2%-2.5% and find a equilibrium between export and imports or whatever is best for our economy.