The automobile is a convenience that many of us can't live without. When the first patent for engines was granted back in the late 1880's, it spurred innovation that has opened up a whole new world. We can literally wake up in one country and go to sleep in another. I can't imagine where would we be without autos; well, let me try. For one, many people would weigh less (from walking everywhere). Secondly, we would have less pollution to our environment from emissions. The fuel that supplies the energy is typically petrolatum or diesel from oil and it can be used as a tool to influence financial decisions.
The price of gas can fluctuate in price. This commodity is influenced by several factors which in turn influences supply and demand. If supply rises while demand remains constant then the result will be a reduction in the price of oil. The price is also influenced by independent oil producing nations and heavily influenced by The Organization of the Petroleum Exporting Countries (OPEC). OPEC is a powerful organization based in Vienna. According to OPEC its mandate it to "coordinate and unify the petroleum prices of its members and to ensure the stabilization of oil markets in order to secure an efficient economic and regular supply of petroleum to consumers, a steady income to suppliers, and a fair return of capital for those investing in the petroleum industry". Since they control the production and price it is a cartel; but the with a good mandate.
Gas prices have a profound influence on world economies. Price movements can affect consumer psychology and influence their financial decisions such as spending. For example when the price of gas is lower then consumers feel "richer" and spend more on both discretionary and non-discretionary items. Businesses also depend on oil and it can have a big impact on their quarterly and annual financial results. Millions of workers are employed in the oil industry and thus jobs are at stake. Other industries are impacted such as companies that make oil rigs. Decisions on the number of rigs to place into service are made partly based on oil prices--the higher the price the more rigs you will see.
Technologies that compete with oil are influenced by oil. Alternative energy found traction not just because of innovation but because of the high price of oil. For example when oil was over $100 per barrel and gasoline for cars was over $4.92 per gallon electric vehicles became more attractive. It would be cheaper to supply energy to an electric car than one that depends on oil. That is a huge selling point for consumers! Two electric car companies that come to mind are Kandi based in China and Tesla based in the U.S. Kandi receives subsidies from the government and is expanding with car sharing programs in many cities throughout the country. Tesla makes beautiful cars and is growing. They have many orders on backlog. They can't keep up with orders. Ballard Power, based in Canada is supplying hydrogen fuel cells as an alternative energy source. It is cleaner energy. Examples of their products include buses in China and Europe, power supply for forklifts and backup generators for utility services throughout the world. Another selling point to alternatives in China is concerns over air quality so reducing the number of cars on the road and using cleaner energy will help ease pollution and smog.
The promise of alternatives can in turn influence oil. For example when the price of oil was falling from over $100 per barrel to $30 OPEC did not want to reduce supply. They had concerns over losing market share to competitors due to alternatives and more players supplying oil such as the U.S. where oil discoveries and innovations in fracking brought oil supplies to the market. It seems like we will always have a need for energy. It is the backbone to any economy. It impacts us all and causes many decisions to be made.
