What Can a Country Do to Minimize the Negative Effects of High Crude Prices?
What Can a Country Do to Minimize the Negative Effects of High Crude Prices
?Nothing is more important these days than managing Petroleum or Energy portfolios in various countries around the world. The ability of crude oil to impact economy of a country has made it such an important commodity to manage. The reason which makes this a complex job is that most of the countries have to rely on crude imports to meet their requirement of oil and the prices on which they import this commodity are further determined by demand-supply forces prevailing in the international markets. As oil is required to fuel growth of any economy in the world, an unprecedented rise in its price could negatively impact a nation's growth. However there are few ways in which a nation can limit this impact if not completely negate it.
As mentioned earlier availability of crude is absolutely necessary for growth of an economy and many of the countries have no choice but to pay higher prices whenever its price rises in international market. In the recent past the political unrest in the Middle East region has triggered a steep price rise. Now lot of economies are left with very few choices on how to manage the negative effect which it will have on their economic conditions. Few things which they can do are:
Subsidize the Crude prices in the domestic market - Many nations follow this approach and limit the impact of crude price rise in their country. The nations where Public sector controls the import and distribution of these products can use this tool effectively. However there is a limit such a subsidy which a government can provide and for how long it may continue to do so. If there is persistence in high price levels, the subsidy has to go someday otherwise it will negatively affect other domains of the economy.
Reduce Local Taxes and Duties - The price at which the fuel reaches its consumer is not the same it which it is imported in the country. These imports are liable to be taxed in the form of import duties and other state/federal taxes. In case the import prices go up and a country want to shield the final consumer to pay entirely this increase it can reduce the rate duties and taxes applicable on this commodity. In case crude prices keep rising and a government decides to maintain same percentage of direct or indirect taxes it will mean more collection with government and higher prices to be paid by consumers which will lead to high level of inflation.
Develop Alternative sources of energy - To reduce our dependency on crude certain other options also need to be worked out. Many non-traditional alternatives of fuel are being developed which can be used in similar applications so that import bill for oil can be cut down. Solar and Wind energies are fast developing and gaining popularity as alternatives forms of energy. As we all know the current oil reserves won't last forever it becomes all the more important for us to focus on these options. Explore Incredible India with India Tour Packages Make your Holiday Stay in Paris Apartments More Rewarding- Go Get a Museum Pass Vancouver Sightseeing - Enjoy a Day Trip on BC Ferries Between Vancouver and Victoria BC Cheap Tickets for Your Trip Pregnancy Travel Insurance: Feel Free to Travel While Pregnant Dive Into The Soul Of India With Golden Triangle Tours Tangshan Hebei China Travel Guide And Tips Gary Woodland Wins His First PGA Tour Cutting Travel Costs by Using Cheap Flights What it takes to be an american idol? Golf Placing Suggestions: Placing Is More Important As compared to Traveling Factors to Consider to get Cheap Flights for a Trip What all is in store at London Olympics for Travellers near London Hotels?