Washigton Post: Prices rising so quickly that gas pumps can't keep up
The Bureau of Labor Statistics told us the other day that gas prices are down. The Fed has been blathering on for months about how inflation is "contained." Unfortunately, here in RealityLand, that doesn't fly. In fact, there's a great story in the Washington Post today about how gas prices are rising so quickly that some older gas stations with analog pricing mechanisms can't keep up anymore. The little pricing wheels stop at "$3.99." Here's an excerpt ...
"Like a lot of small-scale entrepreneurs, Cathy Osborne worries that she'll go out of business if fuel prices rise above $4 a gallon. Not because she won't be able to buy gas at that price, but because she won't be able to sell it.
"The old mechanical gas pumps with scrolling dials at her country store in Fauquier County lack the gears to go beyond $3.99 a gallon. State inspectors shut down her diesel pump several months ago when the fuel topped the $4 mark, so now all that's left are two pumps dispensing 87-octane gasoline, set at $3.75 -- and climbing.
"I don't know what I'm going to do. I don't have $30,000 to invest in new pumps, and I'm barely skipping by," said Osborne, who owns the Orlean Market and Restaurant, a store dating from 1892 with horse-country views of the Blue Ridge Mountains and miles of rolling Virginia Piedmont.
"Osborne said she doesn't make money on fuel sales, but the pumps are a big draw for the hay farmers and cattlemen who gas up their tractors and take their morning coffee in her store. The next-closest service station is a 40-minute round-trip drive to Warrenton, and in Orlean, Osborne's barbecue sandwiches and Amish-baked cherry pie face no competition."
Meanwhile, regarding my last post about inflation expectations, the Fed has said repeatedly that it closely monitors them. Official after official has come out and said that rising inflation expectations would be a real problem. One example: Chicago Fed President Charles Evans said earlier this week that "any increase in inflation expectations would pose an important risk to the achievement of price stability."
Well, 1-year forward inflation expectations are now at the highest level since February 1982. Five-year forward expectations are the worst since August 1996. The federal funds rate was 15% and 5.25%, respectively, at those times. So I'm sure any minute now, we'll hear an announcement about an emergency Fed conference call and subsequent rate hike. Yeah, right. More than likely, the Fed will continue to maintain its "all hat, no cattle" approach to fighting inflation.
"Like a lot of small-scale entrepreneurs, Cathy Osborne worries that she'll go out of business if fuel prices rise above $4 a gallon. Not because she won't be able to buy gas at that price, but because she won't be able to sell it.
"The old mechanical gas pumps with scrolling dials at her country store in Fauquier County lack the gears to go beyond $3.99 a gallon. State inspectors shut down her diesel pump several months ago when the fuel topped the $4 mark, so now all that's left are two pumps dispensing 87-octane gasoline, set at $3.75 -- and climbing.
"I don't know what I'm going to do. I don't have $30,000 to invest in new pumps, and I'm barely skipping by," said Osborne, who owns the Orlean Market and Restaurant, a store dating from 1892 with horse-country views of the Blue Ridge Mountains and miles of rolling Virginia Piedmont.
"Osborne said she doesn't make money on fuel sales, but the pumps are a big draw for the hay farmers and cattlemen who gas up their tractors and take their morning coffee in her store. The next-closest service station is a 40-minute round-trip drive to Warrenton, and in Orlean, Osborne's barbecue sandwiches and Amish-baked cherry pie face no competition."
Meanwhile, regarding my last post about inflation expectations, the Fed has said repeatedly that it closely monitors them. Official after official has come out and said that rising inflation expectations would be a real problem. One example: Chicago Fed President Charles Evans said earlier this week that "any increase in inflation expectations would pose an important risk to the achievement of price stability."
Well, 1-year forward inflation expectations are now at the highest level since February 1982. Five-year forward expectations are the worst since August 1996. The federal funds rate was 15% and 5.25%, respectively, at those times. So I'm sure any minute now, we'll hear an announcement about an emergency Fed conference call and subsequent rate hike. Yeah, right. More than likely, the Fed will continue to maintain its "all hat, no cattle" approach to fighting inflation.
posted by Mike Larson at
12:53 PM
2 Comments:
As soon as the jobs report turns ugly because of the credit crunch and rising energy prices, the Fed will cut again.
The economy lags interest rate changes by 9 to 12 months. Its likely that the worse of inflation is still to come.
We'll probably see some oil production cuts in the coming months as exporter have no incentive to hord US dollars or to reinvest petro-dollars back into the US. It make more sense for OPEC to cut production now that Oil is well above $100 bbl, and have record cash surpluses.
By
Anonymous, at May 19, 2008 at 5:45 PM
A tin-foil moment - I hope this doesn't generate a plot to switch to marketing gasoline by the liter (or quart), like they do in Europe.
Chip
By
Anonymous, at May 20, 2008 at 11:21 PM
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