Wednesday March 30, 2005

Oil prices starting to affect everything else

csmonitor.com :

The hike in oil prices is beginning to ripple through the economy, pinching consumers at places far beyond the gas pump. During the past year, the robust economy absorbed much of the increase in energy costs. Competition for consumers helped, and kept many businesses from passing along the spike in fuel costs. But with gas prices hovering around new record highs, and the cost of diesel keeping pace, many businesses are finding they can no longer absorb the increased costs ...

And though prices have eased in recent days, they remain well above $50 a barrel, and many expect them to stay high. So air travelers on international routes are now seeing huge fuel surcharges, the cost of a bunch of grapes is up a few cents, and economists expect to see costs increase on an array of manufactured goods from televisions to toasters.

- Personal anecdote : recently, I was trying to buy some plastic boxes to keep my CD collection in. The shopkeeper said she had run out of stock and had to order more. She asked me, did I mind if the price went up? I said, "okay, fine". She explained further that plastic prices have been going up a lot due to increasing oil prices (and of course, regular followers of Peak Oil know exactly how, why, and when).

A couple of weeks later, the stock arrived. The prices for each box had gone up by a dollar. Given the original price of each box was (SGD) $4.90, and the new price was now $5.90, that worked out to a price inflation rate of some 20.4%. That's pretty high. And it's just plastic CD boxes - which are strictly speaking, "discretionary spending items".

Now, when these price increases start to hit the rest of the economy, it's going to hit people hard. The money printing presses, electronic or otherwise, don't exactly help either. Will this inflation turn "hyper"? We can only wait and see ...

(2005-03-30 10:13:16 SGT) [Energy] Permalink

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