Oil closed under $59 a barrel today - the highest all year but there has not been the rapid run-up that would explain the rise in gas prices. Still, oil only needs to get to $70 to produce $3.00 gas. Isn't it interesting how we've gone nearly 9 months with declining gas prices and mostly under $2.00 a gallon - until now?
Of course gas prices always increase in the summer for vacations and peak driving. No sense waiting until the demand is here. Get an early start on those price increases.
But here comes the larger issue. So gas goes up 30-40 cents a gallon since the first of the year. Mail delivery needs an increase for fuel - oh, they got one yesterday. Milk, eggs, bread, cereal - all the staples have gone up. In fact they never came down from last summer. This is in effect a double fuel bump - the last time and now.
Everything that uses transportation to produce or deliver its goods and services - which is nearly every business - increases its prices because the gas goes up a little. Then gas goes up some more, and other prices do also.
Certainly makes the case for domestic oil production, competition, more refining capacity, and alternative fuels (that don't cost more to produce than they supposedly save in use).
A few cent increase in the cost of gas, while we may tolerate it ourselves, is translated into higher prices in many other areas. This is the inflationary ripple effect that many fail to consider.
For more information about my consulting, teaching, and coaching services visit my website at stevehoffacker.com. I also maintain a blog (Sales Quips) on the real estate network Active Rain, and you can begin participating in this great forum by visiting here. I also write and maintain blogs for Gold Coast SMC and Florida SMC. © 2009, Steve Hoffacker. All Rights Reserved.
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