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December 05, 2008

Oil and food prices

Food prices spiked earlier this year when oil and gas prices were rising so rapidly. Now that oil and gas prices are falling, should we expect food prices at the supermarket to also go down?

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"Well, certainly some individual items may go down in price. But when we're looking at all supermarket prices together, sort of taking an average, I don't think we'll see those prices go down. What I would expect to see is they will go up but at a much slower rate. And the reason is that although oil and gas prices are certainly components of the cost of producing food, there are many other cost factors: labor, rent, taxes, insurance. And so these costs are still rising and they tend to overwhelm, if you will, the falling gas prices. So, what I'm expecting is rather than food prices, for example, going up at the 6 percent rate they were going up earlier this year, I think in 2009 they'll go up at about half that rate - 3 percent - and, indeed, that's a victory for consumers."

Posted by Dave at December 5, 2008 08:00 AM