High Oil Prices Do Cause Economic Slow Downs

Some say that higher oil prices will not affect our nations economy and they point to last years high oil prices and the cost run ups. Indeed good point on their behalf, but realize there was lots of money printing going on and lots of borrowing and spending too.But also realize that when middle class America starts cutting purchases we will see America sneeze a little and that means many smaller economies in the World we purchase from will catch a cold.

What does high oil prices have to do with it all? Well if people spend more on fuel, then they spend less on consumables meaning retailers cut back on buying and inventory. So consider this a moment will you?.With Inventories being less for large retailers, it also means that small manufacturers who want to service the large retailers will have to be able to adapt or die to the relentless need for that retailer to move products faster and faster and inventory the products at their manufacturing facilities, and then move them quicker.

Next consider getting the stuff to market and the cost of fuel too. The retailers suppliers will have to cut costs, as retailers hold payments and accounts payable for longer. And the suppliers will not be able to afford to run their own trucks because the fuel costs will take them out of the running to offer the lowest cost to the purchasing departments of retailer, store the product, make the product, ship the product and offer the best terms on payment to the retailer.You see this is only one aspect to the many behind the scenes issue in only one sector of Retailing which is hurt by high oil prices.

But as you follow the supply chain down to the city or town level you will see issues with tax revenues, services and jobs too. Consider all this in 2006.

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By: Lance Winslow