<DrumBeat: October 22, 2008 The Oil Drum DrumBeat: October 23, 2008>

219 comments on Why are oil (and gasoline) prices so low?

Comments can no longer be added to this story.

| Show without comments | PDF version

jewishfarmer on October 22, 2008 - 10:41am Permalink | Subthread | Parent | Comments top

Like Westexas, I was genuinely surprised by the collateral damage in food and energy. It isn't that I wouldn't have anticipated declines, but I wouldn't have thought them to respond so quickly - in fact, I have the sneaking suspicion, at least with food, that the declines in price are a little over rapid, and that we won't see more volatile price changes.

Biofuels will obviously be the big factor in food prices in the coming years - best hopes for the end of the ethanol boom.

Sharon

Comments can no longer be added to this story.
Don Sailorman on October 22, 2008 - 11:51am Permalink | Subthread | Parent | Comments top

Sharon, I don't understand your statement ". . . we won't see more volatile price changes."

The recent decline in food prices is not unusual in the history of agricultural markets. Food markets tend to be highly volatile because of demand inelasticity, time lags, and variable weather, to name a few reasons. Financial crises, I think, tend to increase volatility of food prices. Current financial (and eventually economic) crises seem to me to set the stage for a further increase volatility rather than the reverse.

I'm not an expert on food prices, but I have studied--and taught--economic history, and the price volatility of agricultural products is notorious.

Over the long-term, food prices will rise as oil prices rise. But along with the long-term trend I think increasing volatility is likely, both in oil prices and food prices.

By the way, I very much enjoy reading your posts and comments.

Comments can no longer be added to this story.
thomas deplume on October 22, 2008 - 4:58pm Permalink | Subthread | Parent | Comments top

Could a drop in demand from restaurants be part of the drop in price for food commodities? No job means no lunch break at McDonalds. No job means no payday dinner at the local steak house.

Comments can no longer be added to this story.
Don Sailorman on October 22, 2008 - 5:16pm Permalink | Subthread | Parent | Comments top

Undoubtedly you are correct that decreased buying of food by restaurants has contributed somewhat to the decrease in demand for certain foods, but it hasn't had a major impact on the prices of wheat or corn or soybeans. Why not? Because people have not cut back on eating: Rather what they have cut back is their spending on food by eating less frequently at restaurants. I like eating at some restaurants and I hate waiting in line for a table. A couple of years ago, waiting lines were common. I haven't had to wait for a table for the past year and a half.

Comments can no longer be added to this story.
Gail the Actuary on October 22, 2008 - 6:38pm Permalink | Subthread | Parent | Comments top

I have talked to one TOD reader who sells high-end lettuces to restaurants. He said he has decided to discontinue this, because there is less demand for this kind of thing. I presume he will switch to growing something that grocery stores would be likely to sell.

Comments can no longer be added to this story.

219 comments on Why are oil (and gasoline) prices so low?

Comments can no longer be added to this story.

| Show without comments | PDF version