Ripple effect of rising oil prices reaching dinner table
As the price of a barrel of oil hits new highs almost daily, gasoline prices are skyrocketing, and a ripple effect is causing rising prices in other areas of the economy.
The price of food is dependent on rising transportation costs that are passed along to grocery stores, then to the consumer. In addition, rising prices for many food related items, such as plastic for containers, are impacting what we pay for food.
According to the US government, the average price of a barrel of oil was in 2007 was $64.20. As of last week, the price of a barrel of oil was over $146, with some experts predicting $200 a barrel oil in the near future.
The American Automobile Association reported that the average price for a gallon of gas at the beginning of 2007 was $2.24. As of last week, the national average gallon price was $4.10. The price in Siskiyou County was $4.70.
Three Mount Shasta food delivery stores, Mount Shasta Supermarket, Ray’s Food Place, and Berryvale Natural Food Store report that transportation costs have hit the price of their goods and the base price of food. In addition, biofuel production, particularly with corn, has impacted prices. Oil is used extensively in agriculture, including fertilizer and running farm machinery.
Mount Shasta Supermarket owner Keith Cool says he has seen an increase in costs for products that include the increased transportation cost in addition to separate transportation fees on many items for the first time. He said he is seeing $5 to $30 on every delivery with approximately 80 deliveries per week.
“Every time we get a load we are seeing 30 percent of the order going up weekly or biweekly. We are seeing increases across the board,” Cool said. “Several times a week I get a fax from a major producer of another increase. Conservatively, 60 percent of our items have gone up with an average of 15 to 20 percent across the board.”
Ray’s Food Place manager Dean Autry says he is seeing the same thing.
“Absolutely, we have seen added transportation costs. We started to see a little bit of it last year. Now, just about everyone who delivers is charging for transportation. It’s pretty significant,” Autry said. “We carry 25,000 to 30,000 items. We have seen price increases in approximately 10,000 items. If we don’t respond, we go out of business.”
Berryvale Natural Food Store co-owner Belinda Higuera says they too are feeling the cost of oil.
“Almost everyone who delivers has a surcharge. Even a $50 order will have a $20 surcharge,” Higuera said. “Price changes used to be once at the beginning of the year. Now, its every month. Eighty-five percent of our items have seen price increases, including our gifts and clothing. We have seen huge increases in our imported goods.”
The three agree that biofuel production, by which fuel is made from corn, has impacted prices.
“We have seen a 40 percent increase in the price of flour. Corn oil went way up because of biofuel,” Cool said.
Higuera notes that it is not just corn products that are affected by biofuel production.
“Wheat has skyrocketed,” she said. “So much land has gone for biofuels. The farmers make more money growing corn for biofuel than food. We have to asks ourselves, what’s really important here, food or cheap fuel?”
Autry too feels biofuel production has sent the price of food higher.
“What they did with corn certainly seems to have driven up the cost of grains,” Autry said.
Cool points out that being in a rural area adds to the transportation cost.
“We have an added disadvantage of being so far from distribution centers,” Cool said of delivery costs.
Other factors, too, are involved in rising food prices.
“There is a ripple effect. We’re seeing big increases in the cost of equipment repair, refrigeration for example,” Cool said. “Some companies are selling smaller packages, such as ice cream and chips, at the same price.”
Autry notes the cost of packaging.
“Anything that is petroleum based is increasing. Plastic packaging is made from petroleum so it affects the price of plastic bags and milk and other products that are packaged in plastic,” Autry said. “Anything that has to do with petroleum has gone up.”
Cool says he anticipates a change in shopping habits to save money.
“People will buy hamburger instead of steak, white bread instead of premium bread, and less milk,” Cool said.
Higuera said Berryvale shoppers have been responding to rising prices.
“We have not seen a slowdown, but as prices began to rise we saw stockpiling of grains,” Higuera said.
Autry says, however, that there may be a silver lining for local stores as gas prices soar, because more people will be shopping locally rather than traveling to Redding or Medford.
“With gas prices so high, how much can you really save by driving out of town?” Autry said.
None of the three are happy about the situation.
“After 30 years of self employment, it’s harder to be in retail than ever before because of spiraling costs,” Cool said. “It’s as hard on us as it is for you. We’re in the same boat. We’re not the enemy.”
Autry notes that, “We personally pay the same prices as anyone else.”
Higuera called the transportation costs and price increases are “depressing.”
“Every month there are price increases. It’s bad news once a month and I have to pass it along to everybody,” she said.
Autry also has a certain optimism.
“I have been in this business 35 years. We’ve seen this before,” Autry said. “We’ll come out of it.”
Higuera, however, is not so sure.
“We’re adjusting to an era when we could by any luxuries we wanted. It’s a different world now. Cheap fuel is a luxury,” Higuera said. “We have to change our expectation that we deserve everything. The price of oil is never going down and we are running out of it.”