This past week I was down in Greensboro, NC, with the store managers and sales representatives of Southern States Cooperative. They had a great theme meeting with a nice NASCAR flavor.
Many of you remember the old TV show the Beverly Hillbillies, whose star, Buddy Edsen, just recently passed away. The whole theme behind the show was how they made their riches with oil and moved to a West Coast mansion.
In previous columns, I have discussed the importance of oil. Insight from their meeting may provide perspectives concerning the short run and long run future of oil and energy prices.
First, petroleum supplies/inventory came down from 2002. For example, crude oil supply is down 14 percent, distillates down 16 percent and gasoline supply logging in at a 10 percent reduced supply compared to last year.
For the short run, this means higher more volatile prices for these petroleum products.
Another factor contributing to higher prices is that the government is building its strategic reserves from 600 to 700 million barrels. These reserves are stored underground in the salt mines in the southern part of the United States. One might say that these reserves could be drawn upon for domestic consumer consumption, but it’s not likely because they are for security and military use.
Another factor contributing to the wide swings in prices is the just-in-time inventory management philosophy that has only a 10-day worldwide oil reserve.
In the long run, the experts speaking to our group indicated lower prices due to Russia opening its reserves and Iraq. However, I would not hold my breath.
Recently a young student in Iowa Falls asked me if wind power was important. My response was yes, and until we have a national energy policy, our agricultural and general economy will face political uncertainties from nations who are suppliers of our basic needs, whether it’s the short or long run.
National Football League Perspective
If a team loses one game at the beginning of the season, you would think it’s the end of the season for the team and coach. Keep in mind it is the team that wins or gets hot games nine thru the playoffs that usually goes to the Super Bowl.
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Editors' note: Dave Kohl, The Corn and Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
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