Oil & The Cost of Transportation

[mmalluck]

Well everyone is bitching about the price of gas these days and I guess that's good, but most people are forgetting what higher fuel prices really mean.

 

Go to any store and take a look at all the different products in it. How many do you think where made within a few miles of the store? How many were made within 50 miles of the store? 100 miles? 500 miles?

 

Now take a moment and ponder how these products got to your store. Some may have come from over seas, loaded on large cargo ships, unloaded at ports onto trains, carried across the country, then loaded onto trucks where they were finally unloaded at the store. A lot of fuel goes into this process.

 

Now consider the energy cost and petrolium that goes into the goods you buy. Oil goes into plastics, rubbers, fertilizers, and raw energy.

 

With rising fuel prices you can expect the price of every good on the store shelf to increase as well. With this higher cost we can expect to see the economy slow and possibly dip into a ression again.

 

Digging around I found an article on this posted back in April.

http://www.businessweek.com/bwdaily/dnflash/apr2005/nf20050427_2905.htm

They say economic slow down should start to kick in when oil prices reach $75-85 / barrel, but we shouldn't see this until 2007. Thanks to Katrina oil prices are now sitting around $70 / barrel.

 

This article talks about Katrina and it's affect on oil prices and reserves. http://www.businessweek.com/bwdaily/dnflash/sep2005/nf2005091_5858_db094.htm

This article also goes on to say that prices can climb even higher if a gas-panic sets in. I know I saw every car in Atlanta lined up at the gas-stations yesterday. I hope this doesn't catch on in the rest of the country.

 

 

Hmm, it'll be interesting to see if what they say holds true.

[Pangloss]

Right, that's why high gas/energy prices are consider an indicator of inflation.