Continuous Rise in the Price of Oil Is Likely to Cause Global Economic Meltdown
Ever since the early seventies, the UK has become a producer and net exporter of Oil. Normally an increase in oil prices should have spelled a boom for the economy but there are factors that have negated this possibility.Exports have been very important to the UK and its largest trading partner is the USA which has a 15% share of our exports. But the rising oil prices have a different impact on the US. It is a net importer of oil hence pays a huge price and it leads to a possible recession. It shores it up by increasing interest rates which make imports attractive to them. But the downside is that the UK increases the interest rates on international trends and puts pressure on export prices. There is a constant balancing act to maintain export levels and this is not likely to ease in the near term.The sliding dollar in the international market is yet another worry that affects the UK economy. But with the expectation that the sterling too will be weakened is going to reduce the impact. There is a chance of even a decent growth in exports.Inflation has been above target all the time and it reflects an erosion in value for consumers. It is at the highest level for the past decade (3%). But it is still stable enough to go along with. While sales are higher, the income percentages are lesser on lower volumes.Rising interest rates have been taking their toll and industry has been feeling the pinch. All prudent practices come to naught when capital itself becomes costlier. This trend is likely to continue for the short term but will add fuel to fire and really not help the cause of either checking prices or increasing production.The rise in Interest rates has also lead to higher savings but there is an anomaly here too. Deposits have grown but have been utilized more in giving out loans against the equity of households.