Radical Noesis - Thinking outside the box

The Independent notes that the increased fuel prices are hitting businesses, with at 13.5% increase so far this year. They are passing those increases on down the line to consumers. In Britain, the cost increases are driving inflationary pressures, and impacting housing costs as materials prices go up with fuel prices.

Also in the Independent is an article by Genevieve Robert - How expensive oil hurts consumers. As most oil wells are also gas wells, when oil goes up gas goes up. She notes that "gas bills will increase by 11.9 per cent this month, a 33 per cent rise since January last year. Electricity from Powergen will cost 7.2 per cent more, a rise of 25 per cent since last January." Travel costs are going up regardless of how you get where you are going, and housing prices have gone up 5%.

So what is driving the cost of petroleum? There are responses to current events such as the death of King Fahd, and threats of terrorist attacks in Saudi Arabia (and elsewhere). Also in play are the war in Iraq, the negotiation stalemate with Iran, and oil refinery problems in the United States. Only one article even alludes to the issue of increasing demand as an issue - Saudi fears send oil prices soaring.

With a precarious refinery situation in the U.S., the word that "a severe hurricane season could knock out yet more US output," is not welcome news.

It is somewhat amazing to me that we can read about issues that effectively have a potential end in sight - wars, refinery issues, the uncertainty caused by the death of a nation's leader - as driving up the cost of oil (and gas), and in the same articles have it said that prices are not going to come down. Yet, the issue of dwindling supply in the face of increasing demand only gets a line or two. Short term issues can certainly cause price "fluctuations," but the world is dealing with far more than a temporary "fluctuation," and these authors know that.

We are starting to see the increased costs of virtually everything, and that will not go down either. Prices will advance and fall back a bit, but the trend is up and that is a supply and demand issue. The only part of that equation that we can do anything about is the demand side. The odds of a major oil discovery is so remote not even the most addicted gambler would bet on it.