Oil Prices Causes Rise in the Price of Goods



Sean Brodrick takes a closer look at the effect that rising oil prices is having on the prices of consumer goods and services. In this issue of Money and Markets, Mr. Brodrick discusses the relationship between oil prices and product and service prices.

As oil prices climb ever higher, businesses have to pass along the cost. On his most recent trip, Mr. Brodrick saw major airlines, taxi drivers, buses and small restaurants all raising prices. And the financial impact of higher oil prices goes far beyond fuel and food purchases. Thousands of products Americans buy every day all contain oil. According to the American Petroleum Institute, a little more than one gallon of each barrel of oil goes into such everyday products as toothpaste, house paint and cosmetics. Since the U.S. uses over 20 million barrels of oil per day, Americans are burning through 20 million gallons a day before getting into their vehicles.

Manufacturers of everything from wallpaper to cereal are also feeling the pinch. The Institute for Supply Management recently said that its index of prices manufacturers pay for raw materials hit 91.5 in June, up from 87 in May. That's the highest reading since inflation exploded back in 1979.

Every time oil hits a new record high, the price of nearly every product and service in the U.S. goes up accordingly. Brodrick expects rising energy prices will continue driving the cost of most goods and services higher and higher. According to the Calculated Risk website, energy consumption as a percent of U.S. GDP will rocket to over 14% in 2008, a new record.

But the Energy Information Administration data shows that, in June, oil demand in the U.S. fell by nearly 400,000 barrels a day from a year earlier, to 20.342 million barrels a day. That is the weakest demand level for all of June since 2003.

"One way to hedge against inflation is to be cautious with fuel costs like the airlines. Autoweek reports that a company called MyGallons.com lets members buy gasoline via its website at a predetermined average price for the area where they live. The gallons are loaded onto a debit card that the company says is accepted at more than 95% of the nation's fueling stations. MyGallons charges members an annual fee of $29.95 or $39.95 for the service. Based on how many gallons is bought, the service sends a debit card that lets you purchase as much fuel (per gallon, not dollar) as stored on the card. Just remember, gasoline prices can go down as well as up, and if you hedge too much at too high a price, you'll rue it later. The MyGallons program is something you can do right now to lock in lower prices if you think oil and therefore gasoline are going higher," Brodrick states.

To read this issue online, please visit:

http://www.moneyandmarkets.com/Issues.aspxBin-Laden-Oil-Prices-and-Inflation-1946

About SEAN BRODRICK & MONEY AND MARKETS     

Sean Brodrick joined Weiss Research in 2000 as an analyst, bringing more than 25 years experience as a journalist and financial analyst to the position. He is Weiss Research's small-caps specialist, especially in natural resources, and is the editor of the company's Red-Hot Canadian Small-Caps, as well as a regular contributor to its daily e-letter, Money and Markets.

Previously, Mr. Brodrick was the investment director of The Sovereign Society, the world's leading publisher of offshore asset protection strategies and global investment opportunities.

Recognized for his expertise on Canadian and Australian investment opportunities, Mr. Brodrick has been featured on many financial talk shows, including CNBC Squawk Box and Bloomberg Market Line. He is a weekly guest on Market Matters Radio, a contributing columnist to MarketWatch.com and a frequent commentator on one of Canada's premiere financial websites, HoweStreet.com. His report, "70 Days to Empty," has garnered acclaim for its analysis of the forces pushing America toward its next oil crisis and was described by

The Daily Reckoning as "the most important report you're likely to read this year," while his knowledge of uranium has helped investors earn solid gains on the commodity.

Mr. Brodrick holds a B.A. degree from the University of Maine.

Money and Markets (www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc. is located in Jupiter, Florida. For more information about our editors, or to set up an interview, please contact Jennifer Moran at 561-627-3300 or visit www.moneyandmarkets.com.





Oil Prices Causes Rise in the Price of Goods