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Fuel Prices and the US Economy: The snowball has begun to roll...

Saturday, April 19, 2008

The snowball has begun to roll...



It seems today that no matter where you go, there is always something being said about the high price of fuel. Many of us out there simply cringe while watching the dollars roll higher and higher as we squeeze that handle to refill our vehicles. The immediate problem is obvious, as anyone with a lengthy commute will tell you, if you have a long drive (20 miles plus)for a "middle class income" job or less, you can expect to spend easily half or more of a weeks paycheck simply to get to work for the month. Just in getting started, it is obvious to see the direct impact, but let us step back and look at the bigger picture.Fuel costs effect much more than the apparent, out-of-pocket expense for filling our cars. Our entire country is effected. Just look at groceries for one example. This one example is effected in many many ways. Starting at the farm, the costs of fuel means more expense in raising the food, farmers need diesel for their tractors to plant the crops, then more fuel is used in the tractors to harvest the crops, this is just the first step in the "grocery" process. Farmers then have to get the crops to market. This brings us to having to fuel up semi trucks to get the crops to where they need to be. We have just grown the crop, and delivered it, and have already been beat up three times by the oil prices, and still do not even have a usable "grocery" product yet. In the interest of keeping this short for our readers, we will skip the processing stage, but rest assured we have used more of that wonderful costly oil in the processing of the crop. We now have a finished product, but we still need to get it to the stores so that we, the end user can purchase it. Once again, it must be shipped there, often by semi truck. We now have groceries that are rising dramatically in cost, simply because: it costs the farms more to produce them, it costs more to process it, and costs more to deliver it to your grocer's shelves!Now that we have a higher grocery cost, this effects the retail aspect, and employment aspect. Stores do the best they can to keep prices low to encourage sale of more product, but as their expense increases to get the product, they have to make some changes. These changes do not end with the obvious price increase. We have mentioned that they don't want to increase the prices, so they now have to look into lowering overhead. Common sense will tell us that stores will not stop using things such as heating or air conditioning, or turn lights out when customers are no longer in said aisle to save money. What they will do and have begun doing is, lower the hiring wage for newer employees, and switching to more part time employees instead of full time employees so that they can cut the cost of full time benefits, such as health insurance.You now can see the tip of the iceberg of the problem growing. Our basic expenses are growing, our wages are shrinking, and our dollar is weakening. Congratulations, we have now created a complete vicious cycle. -thank you, Mr."oil man" Bush.

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