Fuel for the Fire
It has been said that Fuel – (oil) – is the most additive drug in the world. You need it, they need it, and I need it. We can not do our jobs, entertain ourselves, or otherwise interact with the world without it. As citizens of the United States we look upon ourselves with a sobering question, What causes Fuel to be so expensive.
There have been many studies into that very question on why Fuel is so expensive, but I often wonder to myself why Fuel needs to be so expensive. In recent weeks I was listening to the radio and an interesting comment was made by one of the D.J.’s. Although they may not be the most accurate sources of information I felt his comments did have some substance and warranted some exploration into what they where saying.
The comment goes something to this effect, the names have been left out to protect the innocent. As we shop at supper low prices merchants who’s merchandise is made in other parts of the world that demand causes those off shore merchants to increase their own infrastructure and thus their demand for Fuel increases. As we 1st world residence demand cheaper goods those parts of the worlds where they are made increase their demand for Fuel and the pattern repeats.
As those off Shore Merchants continue to grow their society moves from a distinct 3rd world culture to a 1st world culture. This increases their demand for fuel and in the end as we shop for ever cheaper goods and services we change that cheaper goods with more expensive Fuel. This example does not have to be with Fuel either, it could be with other types of goods not produced domestically.
Any Goods produced outside the local economy will in the short-run cause lower prices but in the long-run those lower prices will be subverted by higher costs for products required by the outside economy. This pattern in global economy will not be removed from the equation until the global economy is on the same footing for both demand and supply of goods. I would imagine this would not be possible and as such will always cause inflation to increase.
To be honest I got a B in Economic so I may not be too correct in the above example, but this trend can be seen in the fuel market world wide, and this increase is also one of the major reasons airlines are hurting so much these days.
Imagine you’re the Finical Officer for your airline. You budget on past trends and set your yearly budget for fuel accordingly only to find out that fuel has past your expected amount not only by the end of January but for every dollar a barrel of oil goes up you have to absorb a 50 million dollar hit to just your fuel budget. Fuel has gone up about 40 dollars per barrel of oil this year, or $2,000,000,000.00. Yiks, and you may wonder why the airline industry is hurting. Your pocket book hurts so does there, but to a much larger, more grander scale.
In the short-run there isn’t a thing we can do about it. There are alternative Fuel methods but nothing you or I are going to use in the near future, and added to that there isn’t really an incentive to switch to another source of Fuel. People still travel, people still use Oil, and people at this point in time don’t really seem to mind.
In the long-run we can change thing if we want too, and we will need to really want to because Oil is ‘cheap’, it is ‘safe’, it is ‘efficient’, and it is ‘here’. Everything else is ‘expensive’, ‘explosive’, and ‘not efficient’ and although that may not all be 100% true, Ethanol is less efficient than Gas, hydrogen can be explosive, and wind power isn’t cheap. It really comes down to two things, a). The environment, and b). making sure we actually get to the long-run.