One economic law is that "Prices rise like a rocket and come down like a feather" in the world of commodities. We have seen this in today's gasoline prices. Oil was over double today's price just a month ago. Gasoline prices went up with the rise in oil prices. Now that oil has corrected to half of what it once was, gasoline prices have also adjusted, but not to the level they were when oil was at the price it is today.
These prices, especially in diesel, are causing many truckers (if you can believe the hype) to operate at a loss if they deadhead their routes. So, while waiting for a return load they are delivering fewer bananas and with the reduced supply, the prices go up with constant demand. If a 'shortage' of bananas is reported, the reaction (to buy bananas before they are all gone) causes the higher prices and empty shelves. (Remember the toilet paper scare a few years ago? The tomato scare this year?)
While the primary reason that oil is dropping due to 'demand destruction', the refiners and wholesalers need to 'catch up' on thier profits when prices were rising. When prices rise, especially when the demand for product is psychological, producer's margins shrink. They slowly may get back to where they were, but I would not count on it, unless we go into a true and major business retraction. With the impending inflation to come in a few years, we can expect prices to rise as well. As an agricultural customer, are you able to purchase untaxed fuel? I know a few gents in the valley that can and do.
This topic is no longer about banana insanity and probably should be moved off this thread........
Quote:
Originally Posted by harveyc
Pauly, I've thought that might be possible, but I've never seen an absence of them at the grocery store where we normally shop.
John, I don't think that fuel costs account for more than a few cents of the increase, so I imagine it also has something to do with supplies. I'm just guessing, but cargo ships are the cheapest means of transporting goods. I'm estimating we can truck something 3,000 miles for less than $.10/pound so shipping bananas here to California should be less. Plus, we're just looking for the increase from earlier in the year when I could buy them for $.29/pound. But your point does remind me of how there has been an absence in the news about large drops in grain prices in the past couple of months. Still, food prices at the consumer level aren't coming down. There were some articles out on that today. Here is one of them: Falling oil prices? Food won't necessarily follow - CNN.com |