Tuesday, June 3, 2008

Ripples in the Oil Slick

Meryl Swiatek

Why Does Everything Cost More?

Linguists take note: “How ‘bout this weather we’re having?” is slowly being replaced by “How ‘bout these gas prices we’re having?” as small talk of choice in America.

As consumers watch the price of a barrel of oil climb up and over the $100 mark to where it currently hovers around $125, prices of other goods and services have been creeping up as well. Some of this is to be expected, like gas prices, since gasoline is made from crude oil. But sometimes a price-hike of another good or service can seem unrelated until you follow the trail back to where the expense originated. More and more lately it seems like oil prices are at the root of the increase.

The transportation industry has been hit the hardest, which means trucking operations, airlines and shipping companies like UPS and Fed-Ex are charging more for delivery. This creates a ripple effect to any other product that needs to be shipped using these methods. Every cent that gas goes up is another ripple in the pond. Well, maybe not a pond—how about an oil slick?

Athenians ran into this ripple recently when City Council approved an ordinance amendment to raise fees for picking up trash and recycling throughout the city. The reason behind the higher fee? Rising diesel prices made it more expensive to run the garbage and recycling trucks.

New Fees

Home owners:
One container $6.50
Two containers $12.00

Rental units:
1-3 occupants $12 for two containers
4-6 occupants $14 for three containers
7-9 occupants $15 for four containers.
10+ occupants $16 for five containers.

Food is another good example of a product that is getting hit from all sides by rising oil prices, but how does that work? It sounds weird to say that oil is crucial in the creation of fruits and vegetables when everyone learns in elementary school that all a plant needs is soil, water and sunshine. But think about it this way: potatoes grown out in Idaho have to be harvested using a gas-run tractor, packaged into a plastic bag (oil is used to create plastic) and shipped across the country in a gas-run truck to finally get to the local grocery store in Athens where they're bought by a restaurant and served to you by a waitress wearing a polyester uniform (another oil-based product). When oil prices go up and the ripple starts, it hits every part of this process, meaning more expensive French Fries for everyone.

When asked about higher prices for trash pick-up and food, Athenians had different opinions about the situation.

Athenians weigh in on the effect of high gas prices.

Will Prices Ever Go Back Down?

According to a recent article in Wired Magazine entitled "Get Used to It," the short answer is, unfortunately, "No." Six months ago when oil was just reaching $100 a barrel, NPR ran an "Oil Turmoil" series about how oil was affecting people's lives, and reported that many oil-producing nations were already running at full-capacity. The series did have some good news for those looking for a silver lining to the price hikes. Though everyone will probably continue to grumble as the prices rise, there shouldn't be anything like the gas shortages of the 1970s.

Another potential upside to the high prices are new innovations developed to battle them, such as more energy-efficient cars and homes. Ray Hill, a finance professor at Emory University explained in an interview with the school's online business journal that the situation isn't all bad:

"On the positive side, higher prices signal to Americans the need to cut back on consumption and to the oil industry the need to search for and develop sites that were too expensive to extract a few years ago. Attention to price also encourages the development of alternative energy sources, the object of considerable investment these days."

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