Effects of the Rising Oil Prices on the Transportation Industry

The transportation industry relies on petroleum to maintain the operation of roads, railways, shipping, aviation networks. As time goes by, oil is getting exhausted, leading to price increases. This research paper will detail in detail the impact of rising oil prices on the transportation industry and its solutions. Petroleum is the main driving force behind the transportation industry because there is no other alternative that can be cleanly or safely transported. Biofuels exist in the market, but unfortunately there is no viable way to harvest enough biofuels to meet world oil demand.

Oil accounts for the majority of agricultural production, and in developed countries there is high demand for mechanization and export. The rise in crude oil prices has a direct impact on the transportation costs of domestic agricultural products. When crude oil prices are $ 60 a barrel, people use biofuels to diversify to reduce production costs (Schmidhuber, 2006). The use of biofuels will increase raw material costs such as wheat, soybeans and palm oil by encouraging the government. In the future, demand for biofuels will increase transportation and over 95% will require transport (Fulton, Howes, & Hardy, 2004). However, the International Food Policy Research Institute (IFPRI) provides an international agricultural commodity trade policy analysis model (IMPACT) to develop food demand, supply and safety by 2020 (Rosegrant, 2008).

The impact of rising crude oil prices and agricultural prices on inflation is evident at the retail price of energy and food, but the high prices of petroleum and other raw materials were higher than non - energy and non - food prices. So far, finished products and services seem to be limited. However, as companies are facing continued high input prices, it is possible that they are trying to pass these costs to the prices of end products and services. In addition, as the foreign currency value of the US dollar declined, the rise in import prices brought significant upward pressure on corporate costs and consumer prices. In the economic forecast of the FOMC meeting in June, monetary policy makers as a whole predicted inflation in 2008. In addition, as the current high inflation level continues, it is possible that the public may bring up expectations for long-term inflation.

Firstly, rising natural gas prices is important information in almost all manufacturing processes, and most consumer products and industrial products will cause price increases. That is inflation. For example, transport costs increase as the price of natural gas rises. The raw materials must be shipped to the factory before becoming the final product, and all final products need to be shipped to retail stores that can be purchased by consumers. Therefore, the increase in shipping costs directly increases to the price of consumer goods. In addition, the surge in crude oil prices is generally attributable to the soaring price of crude oil. This is the most important raw material for chemical products such as nylon and synthetic polymers which are input materials of most industrial products. Therefore, the surge in crude oil prices also leads to higher prices for industrial products. Universal inflation is unavoidable