The global economy is on the upswing. After years of a mostly stagnant or slow-growing economy, the world’s major economies are now expanding. One key factor in this economic resurgence is the reduced cost of energy. Here’s how the falling energy prices are powering the global economy.
What Effects Are Lower Energy Prices Having?
The effects of lower energy prices are far-reaching. Here are the most important ways they’re impacting the global economy.
• They’re putting extra money into citizens’ pockets. As prices go down, consumers have a bit more disposable income to spend on other goods and services which boosts the overall economy.
• They’re providing businesses with lower operating costs. Many businesses, especially those that are highly dependent on burning fuel for production, are now operating much more cheaply and thus turning higher profits.
• They’re stimulating manufacturing. With production costs nearly 20 percent lower in many developing countries such as China, manufacturers have begun to increase their production, invigorating the global economy in other ways.
• They’re helping to reduce unemployment. With businesses saving money on energy, they’re able to hire more employees which in turn boosts the economic stimulus.
• They’re promoting an easing of inflation. Since many energy prices are directly related to the cost of living, lower energy prices equal a higher quality of life and a reduction in world inflation.
What is the cause of Falling Energy Prices?
The primary cause of falling energy prices is the proliferation of new energy sources.
• Shale gas. Fracking technologies are allowing the extraction of previously unavailable natural gas, pushing prices down.
• Natural gas. Initiatives such as liquified natural gas (LNG) terminals across North America and Europe, as well as an increase in supply from Russia and Qatar, have caused the price of natural gas to drop.
• Wind and solar. Renewable energy sources such as wind and solar are becoming cost competitive with traditional fossil fuel sources, especially as their efficiency and technology improves.
• Carbon. Governments are providing extensive tax breaks and subsidies for renewable energies, which has created a more competitive market for energy.
Falling energy prices are having a positive effect on the global economy by putting more money into citizens’ pockets, providing businesses with lower operating costs, stimulating manufacturing, reducing unemployment, and easing inflation. The primary cause of lower energy costs is the increasing use of new energy sources such as shale gas, natural gas, wind, and solar. As renewable energies become more cost efficient and less dependent on government subsidies, the global economy can only benefit in the long run.