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Originally Posted by ngdawg
My statement that it's a speculative market markup is not my opinion, it's said almost daily on the news business report I listen to every morning. While there are addons (taxes, etc.,) and the so-called devalued dollar, everything that has risen in price the last three years is attributed to the price of fuel and nothing else. The cycle becomes vicious-oil prices go up, raising fuel prices which raises distribution costs which are passed thru in product pricing which devalues our spending dollar.
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This is a good observation, but I'm not sure if it's limited to only the last three years. I think it goes much further than that. This is where we get into "oil dependency." We know that beyond transportation, there are many uses of oil.
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Originally Posted by ngdawg
"They" have been saying for decades that we will run out in X years and we haven't. Because we haven't, technology is slow to come up with alternative fuel sources for the masses. Bio-Diesel, Ethanol, Methane based fuels barely touch the surface and more can be done to utilize these and others.
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I'm not sure who's been saying we're going to "run out," but the more sensible analysts have been saying we're going to hit peak production, and there are many indicators suggesting it's happening. New oil projects are dwindling, and they're having a tougher time getting to the sweet light crude of existing projects. This, essentially, makes up what we call "peak oil," for the most part. This drives prices up as it becomes more valuable through rising demand in contrast to questionable supply. This is where speculation comes in. But, as I said, all the factors are at play at once. When the price of oil becomes too much to bear--that is to say, it contributes to high inflation for a certain period--then we will see the alternatives have their day. This is because they will be more financially viable, not just because of technology, but because of comparative prices.
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Originally Posted by ngdawg
Ironically, there are pessimistic reports that state the production of ethanol is a contributing factor to the rise in starvation rates in third world countries. I'm not sure I'm buying that one yet....
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Whether this is the case will become more evident in the days to come. It can be argued that an unnecessarily high meat and dairy production is the prime contributor to starvation, but that is a topic for another thread. But for the purposes here, realize that diverting cropland from food to energy must have an impact on food prices, as it reduces production and therefore supply. Demand for food rarely declines. It's basic macroeconomics. The prices
should go up.
The U.S. notoriously "dumps" grain into Third World markets. This is why it's so hard for farmers to compete there. If Americans demand the corn for ethanol, there will be less of this dumping and therefore less supply to these countries.