The price of oil and inflation are connected in a cause and effect
relationship, that is, when the price of oil increases, inflation also
increases in an economy. This is because, OIL IS A MAJOR INPUT IN THE
ECONOMY, that is, it is used for critical purposes such as fueling of
vehicles for transportation, for running of industrial generators and
machines, for heating homes, etc.
For instance, if the price of oil
increases in an economy, it will increase the cost of production for
those using the oil in their production processes and they will
automatically increase the cost of their products in order to offset the
extra costs. This leads to general increase in the prices of products
in the market and result in inflation.
