High Energy Prices And Its Economic Implications

You will be completely surprised when you compare energy prices from different nations because some have relatively low prices while others charged their consumers with unbelievably high rates.

High energy costs happen when there’s a great movement or increase in the price of oil in the world market due to high and growing demand but with limited supplies. Moreover, if there is a power crisis and their government failed to find alternative sources, at least for a short period of time, it could contribute to worsening the problem.

It was noted that the first casualty of high electricity costs are the households. But there are also broader implications of high energy cost – slow economic growth and the rise of inflation.

1. Reduced productivity. There will be less businessmen to invest in new capital or cause some existing capital to become obsolete. And with the restraint on the growth of labor productivity, real wages and profits will be lower.

2. Market or even the farm gate price of basic goods and commodities and services will increase.

Studies have noted that energy prices would remain high in countries with limited ability to increase energy sources. But this situation would also encourage some businesses to create new, energy-saving technologies. Governments can also facilitate conservation efforts by working to create a regulatory environment that encourages the growth in energy supplies in a manner that is consistent with their own environmental and other objectives.

The development of alternative energy sources will, in the long run, ameliorate some of the effects of higher energy prices.