With inflation rearing its ugly head things are getting interesting. I personally beleive we are entering the begining stages of a long term energy crisis. China and India continue to grow by leaps and bounds. You have almost 2.2 Billion people in those two countries alone using more and more oil! US and Europe continue to use massive oil on a daily basis. Oil is limited – the supply simply can not sustain the current increased consumption. We need an alternative.
The US Goverment has already stated that the cost of a barrel of gasoline will probably remain at or above $63/barrel through the end of 2006! WOW! Higher energy cost means pressures on prices. This is a danger sign for higher inflation and hence higher interest rates. We are at the begining stages of a prolonged energy crisis bound to last at least for the next 10 to 15 years.
Here is the headline on Yahoo! Biz this morning:
Inflation at Wholesale Level Jumps by Largest Amount in More Than 15 Years
WASHINGTON (AP) — Inflation at the wholesale level last month soared by the largest amount in more than 15 years, reflecting the surge in energy prices that occurred following the Gulf Coast hurricanes.
The Labor Department reported that wholesale prices jumped 1.9 percent in September, led by surging prices for gasoline, natural gas and home heating oil after the widespread shutdowns of refineries and oil platforms along the Gulf Coast. Food prices, which had been declining, posted the biggest increase in 11 months as the price of eggs shot up by a record amount.
Excluding the volatile energy and food sectors, the so-called core rate of inflation also posted a worrisome increase of 0.3 percent after showing no increase at all in August.
The news on wholesale prices followed a report Friday that consumer prices had risen by 1.2 percent in September, the biggest one-month increase in a quarter-century as gasoline prices at the pump climbed by a record 17.9 percent.
While the core rate of inflation at the consumer level was well-behaved, rising by a tiny 0.1 percent, the worry is that the sizable increases in energy will soon begin to spill over into more widespread inflation pressures.
A number of Federal Reserve officials in recent weeks have expressed such concerns. In a speech in Tokyo on Tuesday, Federal Reserve Chairman Alan Greenspan said the jump in energy prices “will undoubtedly be a drag from now on.”
Full article: http://biz.yahoo.com/ap/051018/economy.html?.v=11
By Martin Crutsinger, AP Economics Writer