International trade affect gas prices?

Question

So does International Trade affect gas prices and how.....sorry confused..I overheard this and wondered if it was true.

Answer 1

do you mean trade in things other than oil and gas?

Generally, trade improves everyone's standard of living over time, assuming there are no special problems between the currencies of the trading partners.

The way trade improves everyones circumstances is through the principle of comparative advantage.   When two trading partners decide what to produce, each should focus on what it is best at making, even if one partner makes everything less expensively than the other, its still worth splitting up the work and trading.   The reason is that each partner can improve their circumstance by doing what they do best and trading with the others for what they can buy with the excess they do not consume.

So, because international trade helps improve the economic conditions in both partner countries, when you increase disposable income, you also increase demand for scarce commodities.  Oil, and therefore gasoline, are somewhat scarce.  Oil producers are confident in the future price of oil being as high as it is today or even higher, so they do not rush to pump excess supplies to take advantage of high prices, in fact they have an incentive to limit production to gain the highest possible prices.

Because international trade strengthens the economies of other countries, one negative effect is that it tends to increase demand for things like oil, which growing economies consume more and more of over time.