Debtors Relief

What's Fueling Higher Food Costs?

editor@debtorsrelief.com (DebtorsRelief.com Editor) — Thu, 08 May 2008 18:33:43 GMT

High costs at the gas pump may be a pain when you drive, but now it's becoming a burden at the grocery store as well. Few people take the time to consider that the foods they eat are not grown locally; rather, they are flown in from around the world and combined. The costs to transport these food products are rapidly rising due to the increased cost of fuel. This has directly caused higher food costs for consumers as a result.

There is also another way that energy is involved. Government incentives designed to increase the usage of ethanol have led to tons of farmland being converted to meet the demand for corn. This is land that may have been previously used for growing wheat or other edible crops (ethanol corn is not the same as human edible corn). Currently, ethanol crops account for around 7% of the corn crop, but this percentage is only growing.

In the end, it is clear that rising fuel costs have contributed to rising food costs. The cost of transportation for food products have skyrocketed and forced manufacturers to raise their prices. Meanwhile, high oil costs have led to government incentivizations to produce ethanol. This has caused a reduction in the number of farm acres used for human-edible food products. This is all bad news for the consumer pocketbook!

Gas Prices Climb to Record Highs

editor@debtorsrelief.com (DebtorsRelief.com Editor) — Thu, 08 May 2008 18:15:13 GMT

Gas prices climbed 3 cents overnight to hit a new national record of $3.65 per gallon, while oil prices paused for the day on profit-taking by traders. A survey by AAA and the OIl Price Information Service showed that regular gas nationwide rose 2.7 cents to a reocrd $3.645 while deiesel prices matched the record average at $4.251 per gallon.

Gas prices tend to lag oil futures prices, so crude oil's move higher is bad news at the pump. Crude contracts hit a record $124 per barrel yesterday, which means that the average price of gas may soon rise to over $4 per gallon. In fact, if the move continues, few can argue that it will be possible for gas to stay under $4 per gallon.

Things will only get worse with analysts at some investment banks predicting $150 to $200 per barrel oil prices within two years. These forecasts were issued just days after oil hit record highs and are backed up by economic forecasts showing consumption in China and other developing nations on the rise.

Many other analysts insist that trader speculation is the only reason that oil prices so high. In fact, some say that there is little reason for oil to be above $60 per barrel.These are the same analysts that insist that the dollar's decline is the real reason behind the spike in oil and an upcoming rebound could relieve oil prices quickly.

So, how high will gas be over the next few months? That remains to be seen...

Consumer Confidence Hits a New Low

editor@debtorsrelief.com (DebtorsRelief.com Editor) — Fri, 25 Apr 2008 18:05:33 GMT

The consumer confidence survey from the University of Michigan found that consumer confidence is now at its lowest level in 26 years. The survey found that high food and fuel prices, combined with shrinking incomes and falling home values have caused many consumers to save their money rather than spend it. The indicator fell to 53.3 in April, which marks a 6.9 point decline from the previous month.

The economic stimulus rebates due to begin arriving in mailboxes next week should help boost spending temporarily, but a continued rise in food and gas prices will continue to cause consumers to spend less money. Moreover, the survey found that only 30% of consumer plan to spend their upcoming tax rebates, while the rest said they would use it to pay off debt or put it into savings.

The survey also noted that 90% of consumers believed the economy was in a recession and 75% believed the economic problems will persist for another year. Finally, a third of those surveyed said that they were reigning in spending because of uncertainty about unemployment and income.

In the end, this is bad news for the economy that continues to struggle with a variety of problems.