View Full Version : Dow announces up to 20% increase in prices due to oil costs
05-29-2008, 07:31 AM
Well, you knew the costs to business would get passed on eventually....
The business reporter on WGN this morning had made a comment that oil and food costs are not included when determining the core inflation rate due to volatility. However, price increases by Dow, Hershey, General Mills, and others (http://www.bloomberg.com/apps/news?pid=20601103&sid=aAmR.NPK90fU&refer=us) will now cause those costs to be included in determining the inflation rate.
Like we all weren't feeling the inflation already.
05-29-2008, 07:43 AM
Well, we all knew that this was coming, no? At a time like this, I wouldn't mind hearing a well thought-out plan from Washington.
I guess I expected too much.
Seriously, though, I'm not sure how much the United States, much less the world, will be able to survive on these prices. Food, oil, and just about every commodity has seen an increase in price, and almost everyone is feeling the burn.
05-29-2008, 08:24 AM
I don't think the situation is completely hopeless. We just need to move away from policies that don't work and refocus our economics.
Here's my 2 cents: the two biggest factors on inflation right now are food and energy (even though they aren't included when calculating "inflation"). The reality (as I understand it) is that this really just one issue: energy.
Because oil is scarce, alternatives are sought. Instead of focusing on renewable alternatives, our gov't has opted to focus on biofuels (arguments exist on both sides as to whether or not this is a good idea). The laws of opportunity costs dictate that the sources of biofuels cannot be both food and gas at the same time; choices must be made (the opportunity cost of fuel is no food and the opportunity cost of food is no fuel, etc).
Going back to the laws of supply and demand (which we covered in the gas thread), an increase in demand has just placed pressure on supply. Therefore cost for that supply have increased.
I say all this because I do not believe that we are without choices so much as we have simply failed to make the smart choices up to this point. I would like to think that as soon as we stop making bad choices and start making smart ones, we'll notice improvements almost as quickly as we started feeling the pinch. But then again, what do I know?
05-29-2008, 08:53 AM
The business reporter on WGN this morning had made a comment that oil and food costs are not included when determining the core inflation rate due to volatility. Yes, and in the U.S. we have been programmed since the 1980s to accept the “core inflation rate” as the inflation rate by both political parties. This was done out of political and financial gain, not for the need for accurate information. While removing oil and food does prevent dramatic shifts. Oil and food make up a high percentage of the consumer goods purchased removing oil and food cost from the calculation makes the “core inflation rate’ not a true indicator of consumer felt inflation. For that, you would use the “consumer price index,” the U.S. has gone away from using the CPI for like I wrote before political and financial gain.
In times when gas and food prices soar (like today), the numbers look so much better when using the “core inflation rate” compared to the “consumer price index.” You also save much more money when paying fixed income people who receive a cost of living increase based on inflation using “core inflation rate.” It does not mean that these peoples purchasing power has not diminished. Oh well…”let them eat cake” dog food.
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