Business | Opinion
High oil prices could damage growth worldwide
It is pretty hard to call a minor withdrawal from nearly $126 per barrel of crude the light at the end of the tunnel.
- By Leah Bower, Special to Gulf News
- Published: 00:03 May 13, 2008
It is pretty hard to call a minor withdrawal from nearly $126 per barrel of crude the light at the end of the tunnel.
I wish I could believe the happy headlines proclaiming that oil prices are finally going to drop, since prices skyrocketed so far, so fast.
But I don't.
On top of that, these ridiculous oil prices are not just making the commute across town more expensive.
High temperatures and high prices of summer are on the way soon, which will probably mean higher gasoline prices if year-on-year trends hold true.
In the meantime, high diesel fuel prices are driving up the cost of everything from food to toilet paper and putting a dampener on the much-needed economic growth.
With the United States teetering on the brink of recession, and fallout from the housing crisis still reverberating around the world, we really don't need anything dragging down growth and discouraging spending. While gasoline prices bring on sticker shock every time we fill up our tanks, many of us may not even look at diesel prices.
We should be.
While we see those little numbers flying by ever faster when fuelling up our car, truck or now highly-expensive SUV, it is the cost of diesel which is translating into higher prices for almost everything else in our lives.
Retailers are paying more for lettuce, pasta, toys, office supplies and other staples because the cost of getting them from the factory or the field and onto shelves is heavily dependent on the price of diesel. Almost all of those transport trucks and ships fuel up with diesel, so higher prices mean higher transportation costs.
Stores have little choice but to pass those costs on to us, by boosting their prices.
Lorry drivers in the United Arab Emirates are trying to fill their tanks with cheaper, subsidised diesel in Saudi Arabia and Oman, where Gulf News reported that the prices are 80 per cent lower. Meanwhile, in the US, drivers are protesting diesel prices saying that they are losing their small profit margin thanks to the cost at the pump.
Now diesel is even a target for thieves.
Just in the last week, a man hijacked a tanker with 7,400 gallons of fuel on board in Houston, Texas, and another 500 gallons was snagged from a tank by robbers in Australia.
Demand for diesel doesn't look like it is going to be falling anytime soon, either.
Developing nations are increasingly turning to diesel to run electric generators as power needs grow. Even in the developed world, generators often fill in for aging or damaged power infrastructure.
Right now, the entire capital city of Alaska, Juneau, is running off diesel generators after winter avalanches cut off their supply of far less expensive hydroelectric power. The damage may take all summer to fix.
In the summers and winters, when power demand as at its highest, many countries also can't produce enough power to meet demands, and so turn to backup diesel generators to fill the gap and prevent brownouts and blackouts.
The worst part of this news is that this demand may keep diesel prices high even if oil does start to pull back from its record high price. And that, in turn, means the prices of our basic goods are going to stay high, and possible even get more expensive.
That is bad economic news.
If consumers start to cut back because of inflation, and it looks like they are, that could damage growth around the world.
- The writer is a freelance journalist based in Alaska, USA.
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