Will The Oil Price Drop “Trickle Down”?

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282730 runnin on empty

It certainly has made it to the pump, but what I wonder is if it will reduce other prices? I guess if a company has been charging a specific fuel surcharge, they will have to reduce or eliminate that. But what about companies that just raised their prices to cover increased transportation costs? If they reduce their prices to reflect the much lower price of fuel, that will help consumers. If they don’t reduce their prices, that will help their bottom line and indirectly may help our struggling economy.

One specific example I have encountered is the price of birdseed. A 25 pound bag of sunflower chips was priced last year at $22.00. A couple of months ago I bought one at $36.00! I asked about this and was told that the increase was a result of higher diesel cost for the farmers running their farm machinery and the higher cost of transporting the seed to market. I wonder if the price will come down if fuel prices stay the same through the next growing season.

Of course the significant lowering of oil prices has immediate benefits to us, but there is also a long term worry I have about it. What are your opinions?  Do you think we and our elected officials will become complacent again just like we did years ago? Will the call for alternative fuels and better fuel economy for our vehicles fade into a distant memory if oil prices stay around $50 or $60 per barrel?  Will this reduction in oil prices be reflected in lower prices throughout our economy, rather than just at the gas pump?

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Will Sig
1 Linda Prout

SUV sales are up unfortunately, but these people will be sorry in 6 months when fuel prices go screaming back up. They may go down a bit more but OPEC is cutting back production – this WILL increase prices. So we may not have to worry bout complacency.

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2 Steve

hey Will,
I doubt prices will drop that much. I think if businesses are able to charge higher prices and people still buy their products, they are usually very slow to drop prices. And I share your worry that drivers will quickly go back to their old habits if gas stays “cheap”… we shall see.
~ Steve, aka the trade show guru

Steve | Trade Show Gurus last blog post..Stay at Home Dads and Goulash

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3 John

Yes I think prices will fall. Also some prices that would have been going up (without the drop in oil prices) will be avoided. yes to a large extent people will get complacent again. I actually do not think oil prices will stay this low for long. I would be surprised if oil is not above $100 by the end of 2010.

John @ Curious Cat Investing Blogs last blog post..Feds Rethink Rules on Retirement Savings – They Shouldn’t

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4 John

Yes I think prices will fall. Also some prices that would have been going up (without the drop in oil prices) will be avoided. yes to a large extent people will get complacent again. I actually do not think oil prices will stay this low for long. I would be surprised if oil is not above $100 by the end of 2010.

John @ Curious Cat Investing Blogs last blog post..Feds Rethink Rules on Retirement Savings – They Shouldn’t

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5 Swubird

Will:

No, I don’t not think that prices of every day consumer goods will fall. They never do.

As to what our politicians will do to make us energy efficient, yes, I think they will nod off and forget about the high cost of oil. They didn’t do anything when oil used to be fifty dollars a barrel. They said it wasn’t economically feasible to get off oil. And they didn’t do anything when oil was one hundred and fifty dollars a barrel. They just complained about it. I do believe that we will stay on the oil nipple for the next several decades, but that internal combustion engines will get smaller and smaller and more efficient. This is exactly what’s been happening since the early 1950’s. Way back then, who would have ever guessed that most Americans would be driving four cylinder cars? Absolutely not. Remember how awful the VW was when it first came out? Egad! Drive that thing? I don’t think so. Then Datsun, Toyota, Mitsubishi, and even Mercedes went micro and sold millions of compact cars. Meanwhile, Ford, Chrysler, and GM nearly went under. So, it is my opinion that the future still depends on oil, and ICE vehicles.

Having said all of that, however, I do believe that there will still be a continuous trickle of alternative fueled cars seeping into the market place. This is apparent even in today’s market. Experimentation and innovation will continue to introduce new technologies. But until the energy premium of purchasing one of those babies is brought under control so that the average consumer can buy one, they will remain just a trickle.

Happy trails.

Swubirds last blog post..THE GREEN-EYED MONSTER!

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6 John

It is amazing how quickly the prices have dropped. It is $1.69 where I live and not too far away it is only $1.55. This is lower than it was a year ago, so the drop is quite significant.

I certainly hope that the ideas of greener more energy efficient cars do not fade away, because I feel it is a direction we should be heading in. Something similar happened during the late 70s and early 80s, but when gas prices dropped, the car companies went right back to making gas guzzlers and consumers went right back to buying them.

Johns last blog post..Vitamin K Might Slow Insulin Resistance Among Senior Males

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7 Anna

I hope it stays the way it is now, if goes lower then may start climbing hight again, we need stability, and the over dollar per litre price was killing me…..

Annas last blog post..My Animal Stories – Lesson Learned About Cats & Dogs

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8 Will

Thanks for all your opinions! I can agree with all of them which shows how convoluted this whole issue is! I also don’t think most prices that went up because of the high price of oil, will ever fall. However the companies like UPS that put on fuel surcharges may have a hard time not removing them now. And Anna, I agree, that a high enough price to keep the incentive on for new energy development, but not so high as they were, is probably the best to hope for. Stability is king. The crazy ups and downs keep people uncertain and afraid of what the future holds.

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