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5 Surprising Ways Oil Prices Affect Our Everyday Lives

5 Surprising Ways Oil Prices Affect Our Everyday Lives thumbnail

The effects of oil prices are more far-reaching than what is immediately visible. Petroleum permeates nearly every corner of our economy.

In fact, just last week, the federal government revealed that social security benefits will remain stagnant in fiscal 2016 because inflation – the deciding factor on whether to up benefits – was weighed down by low oil prices.

That’s the tip of the iceberg.

Here are five other, less-considered ways the price of oil impacts our daily lives…

5 Ways Oil Prices Impact Our Lives

Oil Prices Impact No. 1: Plastic is a carbon-based polymer compound that’s an essential part of everyday life. Literally, it’s everywhere. Thousands upon thousands of items are stored or packaged in plastic. Because of its inert nature, plastic can be used for these purposes without fear of chemical interaction with the contents.

When oil prices fall, plastic companies experience an uptick in sales. This has to do with customer-level disposable income. Cheaper gas prices mean more pocket money.

Furthermore, companies engaged in plastics are among the biggest beneficiaries of falling crude prices, being derivatives of crude oil polymers, reported Zacks on Dec. 19, 2014. Approximately 5% of the worldwide oil production is used to make plastics, so the cheaper the oil, the cheaper the plastic production.

Oil Prices Impact No. 2: Petroleum-based lubricants such as transmission fluid, grease, and motor oil are what make your automobile function properly. High gas prices mean that these materials cost more to produce. One barrel of crude oil contains .09% oil used for lubricants.

The effect of oil prices on this subindustry was seen on April 20, 2012. That’s when Chevron Corp. (NYSE: CVX) announced it would raise the price of its lubricating oils by 3% to 6% because of the continuing rise in base oil and additive costs – all driven by the rise in oil prices.

Oil Prices Impact No. 3: Low oil prices affect the banking system as a whole. They tend to cause debt defaults that have wide-ranging consequences. For example, in December 2014, the value of Venezuelan bonds fell below $0.40 on the dollar because of the high default risk with low oil prices, reported Bloomberg on Dec. 15, 2014.

Additionally, it becomes much more difficult for shale drillers to pay back the loans they have taken out when oil drops. Cash flow lightens and interest rates on new loans shoot up. The huge amount of debt that shale drillers take on suddenly becomes at-risk.

And energy debt currently accounts for 16% of the U.S. junk bond market, so the amount of risk is substantial.

Oil Prices Impact No. 4: Petroleum is used in many medical products: heart valves, artificial limbs, stethoscopes, syringes, hearing aids, vaporizers, anesthetics, antiseptics, operating gloves, and equipment tubing, to name a few. When oil prices rise, so too do the costs of these medical devices…

In 2010 alone, 3.4 billion pounds of plastics were used in the healthcare industry, meaning that an oil shortage would hit doctors and patients alike very hard, both in terms of supply shortage and supply inflation.

Oil Prices Impact No. 5: Aside from prices at the pump, oil prices also have an indirect impact on transportation. When an airline pays more for jet fuel, that cost may be passed on to consumers in the form of higher ticket prices or fuel surcharges. When the trains and trucks that deliver food to the supermarket pay more for diesel fuel, the added cost shows up during checkout when you pay for your groceries.

money morning



22 Comments on "5 Surprising Ways Oil Prices Affect Our Everyday Lives"

  1. makati1 on Wed, 21st Oct 2015 7:20 pm 

    Duh! Surprising? Maybe to the village idiot. Maybe the writer is one? Oil is used in everything today, at some stage of production, distribution, and use. Everything. And some things, many times. Take oil out of the picture and we would be living 18th century lives.

  2. apneaman on Wed, 21st Oct 2015 7:27 pm 

    What are the prerequisites to be a headline writer in 2015?

    Mouth breathing?

    Persistent drooling?

    Snot on upper lip?

    One eye lower than the other?

    Journalism degree?

    All of the above me thinks.

  3. ghung on Wed, 21st Oct 2015 8:29 pm 

    “Oil Prices Impact No. 1: Plastic”

    Aren’t most plastics made from natural gas?

  4. ghung on Wed, 21st Oct 2015 8:31 pm 

    BTW: the ‘money morning’ link is broken.

  5. Truth Has A Liberal Bias on Wed, 21st Oct 2015 8:35 pm 

    http://www.gurufocus.com/news/351873/oil-guru-andrew-halls-astenbeck-capital-july-letter-to-investors

    “There is about 72 million bpd of conventional non-shale crude oil and condensate production globally, with about 42 million bpd of this outside of OPEC. Without constant reinvestment this production would decline by about 5% per annum on account of reservoir depletion. For example the wells that were producing 60 million bpd of oil back in 1995 produce barely 20 million bpd today assuming an average annual decline rate of 5 percent. That is a loss of 40 million bpd to decline and depletion from the wells that were producing at the beginning of 1995. Similarly, over the next 10 years, 30 million bpd of production will be lost to decline and depletion from the wells that are producing today. In order to offset this loss, about three and a half million bpd of new production annually needs to be brought on stream.”

  6. dave thompson on Wed, 21st Oct 2015 9:00 pm 

    This article is a reflection of how uneducated the general public is about oil and what it means to industrial civilization.

  7. makati1 on Wed, 21st Oct 2015 10:58 pm 

    ghung, some plastic products from oil … partial list.

    Ballpoint Pens, Football Cleats, Upholstery, Sweaters, Boats, Bicycle Tires, Sports Car Bodies,Fishing lures,
    Dresses, Tires, Golf Bags, Cassettes, Dishwasher parts, Tool Boxes, Motorcycle Helmet, Transparent Tape, CD Player, Faucet Washers, Clothesline, Curtains, Basketballs, Vitamin Capsules, Purses, Shoes, Dashboards, Footballs, Panty Hose, Percolators, Life Jackets, Skis, TV Cabinets, Shag Rugs, Electrician’s Tape, Tool Racks, Car Battery Cases, Mops, Slacks, Oil Filters, Umbrellas, Yarn, Toilet Seats, Fishing Rods, Ice Cube Trays, Speakers, Electric Blankets, Tennis Rackets, Fishing Boots, Dice, Nylon Rope, Trash Bags, Water Pipes, Roller Skates, Surf Boards, Paint Rollers, Shower Curtains, Guitar Strings, Luggage, Safety Glasses, Football Helmets, Awnings, Eyeglasses, Clothes, Toothbrushes, Ice Chests, Footballs, Combs, CD’s & DVD’s, Paint Brushes, Balloons, Sun Glasses, Tents, Heart Valves, Crayons, Parachutes, Telephones, Pillows, Dishes, Cameras, Artificial Turf, Artificial limbs, Bandages, Dentures, Model Cars, Folding Doors, Hair Curlers, Movie film, Soft Contact lenses
    Drinking Cups, Refrigerators, Golf Balls, Toothpaste, etc.

    http://www.ranken-energy.com/Products%20from%20Petroleum.htm

  8. Plantagenet on Wed, 21st Oct 2015 11:10 pm 

    Gummy bears are made of oil.

    http://jalopnik.com/six-things-youd-never-think-were-made-out-of-oil-1441526286

    So is lipstick

  9. GregT on Thu, 22nd Oct 2015 12:02 am 

    Plantagenets are made of gummy bears. The yellow ones that look like human skeletons. Big sellers at hallowe’en. Lemon flavoured.

  10. Nony on Thu, 22nd Oct 2015 1:13 am 

    My big butt plug and giant anal beads are made out of oil.

  11. GregT on Thu, 22nd Oct 2015 2:21 am 

    “My big butt plug and giant anal beads are made out of oil.”

    That’s great Nony, why waste time here when you have something so much more important to do with your spare time.

  12. ghung on Thu, 22nd Oct 2015 8:11 am 

    mak: Just about everything on that list comes from natural gas and/or natural gas liquids (propane, ethane, etc.), not crude.

  13. makati1 on Thu, 22nd Oct 2015 9:27 am 

    Do your own research ghung. It all comes from oil. Did you bother to read the referance?

    “…A partial list of products made from Petroleum (144 of 6000 items)

    One 42-gallon barrel of oil creates 19.4 gallons of gasoline. The rest (over half) is used to make things like:…”

    See the above list in my previous comment.

  14. ghung on Thu, 22nd Oct 2015 10:11 am 

    Sure mak. Most plastics are made from olefins. Per Wikipedia:

    “Chemical plants produce olefins by steam cracking of natural gas liquids like ethane and propane.”

    Also see: https://en.wikipedia.org/wiki/Polyolefin

    “A polyolefin is any of a class of polymers produced from a simple olefin (also called an alkene with the general formula CnH2n) as a monomer. For example, polyethylene is the polyolefin produced by polymerizing the olefin ethylene. Polypropylene is another common polyolefin which is made from the olefin propylene….

  15. BobInget on Thu, 22nd Oct 2015 2:07 pm 

    http://seekingalpha.com/pr/15071566-petrobras-helicopter-tender-process-expected-to-be-canceled

    Oil prices far too low to justify deep water drilling.

  16. makati1 on Thu, 22nd Oct 2015 8:31 pm 

    ghung, I didn’t say things were not made from NG, but it appears that you are saying that most are. Obviously you are heavily invested in the fraking craze or natural gas in general and cannot see outside the box you live in.

    Indirectly, almost everything is made with an oil input somewhere along the line. Everything. NG is just part of those products production. Oil is the main one getting the NG to the end use.

  17. Davy on Thu, 22nd Oct 2015 8:36 pm 

    Mak said “Obviously you are heavily invested in the fraking craze or natural gas in general and cannot see outside the box you live in.”

    Wow, that is reachin into the litter box. I won’t say anymore because the G will hammer the M for such a petty distortion and not true.

  18. ghung on Thu, 22nd Oct 2015 8:48 pm 

    Good morning, Mak.

  19. Keith_McClary on Thu, 22nd Oct 2015 10:35 pm 

    How much cheaper will a heart valve be with lower oil prices?

  20. makati1 on Fri, 23rd Oct 2015 3:05 am 

    Good morning ghung. No offense meant. Sometimes I need that second cup of coffee to be civil. Comes with age, I guess. No way to retract or modify comments here after the send button is pushed.

    Sure lots of plastics come from NG, in one form or another, I guess. I’m not a chemical engineer so I’m only going by my education and some online research. I do know that most, if not all, NG would not even be recoverable without oil.

  21. makati1 on Fri, 23rd Oct 2015 3:07 am 

    Keith, my stepdad has a new heart valve. It was donated by a pig, not manufactured. Probably most replacements are from the farm, not the factory?

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