How the $125 Oil Barrel Price Will Affect Daily Life
Posted by on July 20, 2022 in Blog.
We’ve all seen the headlines about rising gas prices. They are currently very high, there’s no doubt about it. Whether you realize it or not, oil and the products that are derived from its manufacturing are an integral part of our daily lives. Currently, the price of an oil barrel is hovering around $125.
The reason we focus so much on gas prices is that we can visibly see it. When you get to the gas station, the prices are plastered on the sign, and your wallet feels the burn. What you may not realize is that it’s not just gas prices that are affected by the price of an oil barrel. In fact, over 6,000 products worldwide utilize oil or other petroleum products.
So, what does the $125 oil barrel price mean for Canadians in their daily lives? It’s important to understand how the price of oil is determined as well as the ways we use it every day. Let’s look at how oil prices affect daily life and what you can do to prepare for it.
How the Price of Oil is Determined
To start, we need to understand how the price of oil is determined. Oil is not only traded within Canadian borders but is an international commodity. It’s transported all over the world through ships and pipelines. Ultimately, the price of oil comes down to supply and demand.
For example, in 2020 the world was in lockdown due to COVID-19. During that time period, there wasn’t a demand for oil. Gas prices were around $2 a gallon, and barrels of oil were taking up space in storage. Factories were closed, and the manufacturing world had come to a halt, so there was a large supply of oil and little demand.
Fast forward to 2022, and we are now seeing the world open back up. In 2021, the price of oil went up 60% and it’s continuing to do so. This is not all due to supply and demand, as oil prices can also become political. As an internationally traded resource, there are some countries that are large distributors of oil, and when there are problems it can cause prices to rise. This is currently happening due to sanctions on Russia.
The Effect of Oil Prices on Daily Life
While we may not be able to see immediate changes when the price of oil fluctuates, it affects a lot more than the gas pump. Oil is a crucial staple in many industries that keep us going such as healthcare, farming, and transportation.
Transportation
Most of us don’t go a day without utilizing some form of transportation. Whether it be your own car, the bus, or a plane, you are benefiting from oil products. Think about it, you need to get an oil change for your car, right? That is obviously going to take oil and the price will change depending on how much the facility had to pay to get the oil in the first place.
As we already know, gas comes from the oil industry and the prices change daily depending on the price of a barrel. Since public transportation methods also use oil-based fuel, the prices could rise if oil continues to.
Vacations
The $125 oil barrel price could affect summer travel plans. If you’re planning a road trip, you’ll need to account for the rising gas prices. Air travel could also become more expensive since plans also utilize jet fuel that’s derived from oil.
Healthcare
Products made from petroleum are an essential part of the healthcare industry. It’s used in the manufacturing of life-saving equipment as well as:
- MRI machines
- IV bags
- Stethoscopes
- Monitors
- Surgical Instruments
- Pacemakers
If prices of oil continue to rise, it could potentially mean higher healthcare costs. Oil is not only an important part of healthcare within medical facilities, it’s used in many products we have in our homes to keep us safe such as:
- Soaps
- Antiseptics
- Aspirin
- Disinfectants
Do you wear glasses or contacts? Oil also plays a role in the manufacturing process for eyewear as well as hearing aids and prosthetics. Essentially, the production of anything you use for your health involves oil at one point or another.
Groceries
The price of groceries has been affected by several factors including labor shortages and supply chain issues. In 2021, the average cost of groceries rose about 28%, which is more than we’ve seen in about a decade. With the oil price lingering around $125 a barrel, they could go up even more.
Farmers need oil to produce energy for their equipment. With rising oil prices, the cost of crops could go up. Food also needs to be shipped from place to place, which could play a part in cost, as well.
Utility Bills and Housing
Your heating bill probably went up over the winter due to inflation. A larger bill is never a great surprise, and the price of oil could make it go up even more. Oil is needed for energy, and when the price is higher, that means energy will be more expensive.
Along with your heating bill going up, rising oil prices could also affect the housing market. The equipment used to build new homes requires energy that comes from oil products which mean construction teams may start charging more for their services, which could drive up the already high costs of real estate.
Other Products
Along with healthcare and farming, there are many other products that rely on petroleum manufacturing that many of us use every day.
- Paraffin Wax
- Paraffin wax isn’t just for candles. It’s also used to insulate electrical wires, protect foods, and is used as a sealant in some products.
- Asphalt
- Asphalt is used in the construction of roads and bridges as well as roof shingles.
- Sulfur
- Sulfur is a crucial ingredient for many fertilizers used to grow crops.
- Propane
- Propane is commonly used when natural gas isn’t available. You’ve probably eaten something that was prepared on a propane grill, before.
Conclusion
To sum it up, oil is important and the rising prices will affect our daily lives. If oil continues to stay around $125 a barrel, Canadians can expect to see higher prices for goods and services. It’s important to keep an eye on it, and plan accordingly.