Monday, March 10, 2008

Independent truckers will soon be priced out of business.

Unless you drive a diesel powered vehicle, you probably haven't thought much about the fact that the price of diesel has recently risen to around $3.75, which is around .60 higher than regular gasoline. If you don't have to buy diesel, you may think that this doesn't affect you. However, you are wrong.

Have you noticed the price of groceries going up? Much of the reason for the escalation in food prices can be attributed to high diesel prices. Think about it. Nearly everything that you buy in the store arrived there in a truck that runs on diesel fuel, and when the cost of diesel goes up, so does the cost of transporting those goods to the stores. Thus, the prices of those goods goes up accordingly.

Up until the past few years, the price of a gallon of diesel fuel had been lower than the price of a gallon of regular gasoline by around 30 to 40 cents. However in the past four to five years, diesel has been 15 to 25 cents more than gasoline, and just last week, diesel went up nearly 25 cents per gallon in one day.

Even if you can still afford to fill up your car's gas tank, the cost of diesel is something we all need to be concerned about because the higher the price of diesel, the higher the price of nearly everything else we buy, including that gasoline that gets hauled to the gas pumps in a diesel truck.


Tony Arnold said...

When you look at the impact of petroleum product cost on the entire supply chain of any product or service, it is a 5-20 times hit on total costs.

Petroleum products are used as raw ingredients at multiple points; every delivery point of any item from start to finish is impacted; energy costs at multiple points in the manufacturering/service chain; etc.

No single item price has greater impact on total costs. Most unfortunately, much of the high prices for petroleum products are artificially inflated via controlled supply. The important point here is that the petroleum suppliers can drop the price any time an alternative becomes cost competitive at the current high prices.

Alternative solution investors know this, so they hesitate to invest when they can be priced out of business immediately.

JMG said...

Also, it's amazing how many products we use every day contain petroleum: synthetic fabrics, car tires, cosmetics.

As far as supply goes, I've heard on the news that supplies are high right now and the reason the price is so inflated is because of the declining value of the dollar.

I think it's all contrived by the Federal Reserve. I've been reading and learning about the Fed here lately, and it's really infuriating.

Ayatollah Mugsy said...

With the way the dollar has fallen, it's a wonder gas prices aren't higher. When President Bush took office, the dollar was worth more than a euro. Now, a euro costs over $1.50.

And with the way this country prints and spends money it doesn't have, it's only going to continue to get worse.

JMG said...

I agree Mugsy. I don't see how printing up new money to send us in that rebate check is going to help the situation.

Tony Arnold said...

Instant gratification is how it helps. Don't cure my disease doc, just give me a pain shot now!