22. MORE ON OIL AND FOOD PRICES
QUESTION: Won't increasing energy costs for food processing and transport cause food prices to go through the roof?
ANSWER: No. Economists have been carefully analyzing this issue for years. An in-depth report on the subject from the Economic Research Service (USDA) concludes:
"The empirical results presented above suggest energy prices will have a relatively small but positive impact on the average price that consumers pay for food. The simulations suggest that a doubling of crude oil prices would raise average food prices in competitive food markets by as much as 1.82 percent in the short run, and by 0.27 percent in the long run."
So let's calculate shall we? Crude is now about $65. When it goes up to $130 during the "super spike", I'm going to have to pay a whole $2 extra on every $100 of groceries. That is scary, and cataclysmic. I'm sure people will be breeding goats and farming their back yards in terror, rather than not buying a pack of gum for their kid at the register.
Oh, and by the way, processed food isn't good for you. Yes, Cheetos may be delicious, but they are very fossil fuel intensive, and will definitely cost a few cents more per bag in the post-peak period. It's probably better to just stick with the ol' reliables like corn and beans and potatoes.