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Essay on Changes in Oil Prices and Its Effect on Different Economies
Adjustment processes suggest that changes in oil prices is functioning in economies rather like in market economies. At the same time they are the key to understanding the effects deriving from changes in oil prices as a permanent phenomenon. Even though changes in oil prices stand for a deterioration of the value of money 1/P in similar ways, their ways of taking effect differ: In the case of changes in oil prices it becomes effective in the form of loss of purchasing power when there is an ever –dwindling volume of petroleum products in exchange for one monetary unit, whereas in the case of changes in oil prices, the decline of money value is indicated by the impossibility of obtaining the desired volume of petroleum products at all in the first place. That is the reason why with changes in oil prices, the economic agents can at any time spend all their money, yet you have to face falling real value proportionate to the actual price increases.
With permanent changes in oil prices, however, they are not able to do so in total, because their desired money expenditures exceed the available, state priced aggregate supply of petroleum products. In order to anticipate changes in oil prices, one has to buy goods as long as prices have not risen and in addition put up the terms of contracts reaching into the future (interests, wages, rent, etc.) by the anticipated rate of changes in oil prices on time. But then whoever wants to anticipate changes in oil prices must at once spend all cash money…on the supply of petroleum products at hand in the economy. In contrast to the case of changes in oil prices, where real claims are continuously repressed by rising prices, this induces a permanent “chase for petroleum products”, inevitably leaving all participants to some extent, or some of them, entirely empty-handed.........
