$3.80 by summer?
 

By RAELYNN RICARTE
News staff writer
January 8, 2008

Energy experts are predicting the cost for a gallon of regular gasoline could climb as high as $3.80 per gallon by summer — and raise the price of food and other goods even more.

Tony Weseman, owner of Jim’s Market in Parkdale, began to notice higher costs for deliveries when gasoline began selling for $3 per gallon. He said most food supplies increased by at least a small amount and petroleum-based products, such as cosmetics, went up by as much as 20 percent.

“Everything’s costing more across the board,” said Weseman. “An increase of two or three cents on one item doesn’t seem like a lot but it adds up over the course of a year.”

Within the last year, motorists in Oregon have seen fuel prices climb from an average of $2.66 per gallon to $3.11.

According to federal reports, the high cost of oil — the price of a barrel briefly topped $100 earlier this month — is tied to greater demand from industrializing nations, such as China and India. Also contributing is political tension in oil-producing nations such as Nigeria and Iran. The price increases have helped lead to the record profits, in the billions, reported by the three major U.S. oil corporations.

U.S. Rep. Greg Walden and other members of the House Energy and Commerce Committee were informed in mid-December that oil and natural gas prices have been subjected to “speculative price manipulation.”

Michael Greenberger, director of the Center for Health and Homeland Security at the University of Maryland, contends that oil is overpriced by $20 a barrel and natural gas by as much as 50 percent.

Based on the information provided by Greenberger and other sources, Walden believes that Congress needs to require “greater transparency” of actions taken by IntercontinentalExchange (NYSE: ICE) and other financial companies that operate Internet-based trading of futures and both energy and commodity contracts.

Earlier this year, Walden voted for the Federal Price Gouging Prevention Act. The bill, House Resolution 1252, forbids the sale of energy at “unconscionably excessive” levels or at a price where it is clear that the seller is taking unfair advantage of unusual market conditions or an emergency to increase prices unreasonably.

“Unfortunately, it does appear that manipulation is happening, and it’s the consumers who are getting stuck with the bill,” said Walden.

“That’s not right, and it’s time for Congress to step in to stop manipulation in the markets.”

Food and fertilizer price increases can also be tied to the heightened national focus on ethanol production. Ethanol is made from corn and grains and the new demand for these products has increased their marketability. There are currently 111 ethanol plants in the United States and another 75 under construction, according to the Renewable Fuels Association.

The U.S. Department of Agriculture reports that in 2006, about one-fifth of the nation’s corn harvest was used to make ethanol. From the summer of 2006 to the summer of 2007, corn prices rose by 70 percent.

That doubled the cost of manufacturing tortillas and set off huge protests in Mexico City, which buys much of the product from America. The higher price for corn has also affected manufacturing of animal feed, which has raised not only meat prices but the cost of related products, such as milk and eggs.

Hood River County’s orchardists are now paying more for fertilizers due to the increased demand from farmers of corn and soybeans, which is used to make bio-diesel.

Bruce Decker, a pear grower and field man for Wilbur-Ellis Company, said the cost of many fertilizers has come close to doubling in the last two years.

However, he said orchardists are more worried about labor issues at this time than fuel and fertilizer cost increases, which cut less into their profit margin.

Decker said these price increases have been offset by a good return on fruit sold in foreign markets. He said the weakened American dollar has benefited area growers — although the economic situation could reverse if the dollar grows in value and operational costs continue to go up.

“For now, everything’s looking pretty positive, but continued fuel and fertilizer increases could take a bite out of our income,” said Decker.

The high cost of petroleum products is also behind price increases for many other services.

For example, Tammy’s Floral in Hood River recently upped the cost of a delivery within the city limits from $7 to $8. The price of deliveries to outlying areas has remained the same — but could go up as fuel prices continue to climb.

“The higher price of gas has made quite a difference for us,” said Natalie Brookwell, a floral designer.

County residents are also paying 2 percent more than the annual 3 percent adjustment for garbage service. In December, Erwin Swetnam, district manager for Waste Connections, Inc., said the higher fee was necessary to cover added fuel costs and the higher price of plastic recycling bins.

Weseman said people commuting to and from Hood River County for employment face a serious economic plight if oil prices don’t stabilize. He said these motorists will be paying more in almost every area of their lives.

“If this keeps up, I think times are going to get real tough for low- to middle-income families,” he said.