Cows, corn and oil?
March 5, 2008
I am curious by nature. I can’t help it.
In my younger days, books were always a source of intrigue. In third grade, I asked my teacher if I could read novels instead of the short stories in our school-provided reading books. Thankfully, she obliged. My curiosity has since been enlightened by a wider variety of issues, not just the prospect of reading a Roald Dahl novel. (It was Danny the Champion of the World, for the record).
More recently, my curiosity has been piqued by what seems to be a simple issue, but is dripping with more convoluted ramifications than I originally anticipated.
Due to our current relationship with the power players in the oil industry, the contents of our collective wallet are slowly evaporating at the gas pump. Some people are combating the problem by buying hybrid vehicles. Some are utilizing public transportation. Others are riding bikes. All are great personal solutions.
In a situation that seems completely unrelated to oil, at least on the surface, wallets are losing some more of their thickness.
Perhaps it is simply the effect of inflation, but a gallon of milk seems to be ridiculously expensive. This is not a situation in which a college student who now has to buy groceries is hit with reality. I keenly remember a gallon of 2 percent milk being $1.99 not too long ago. Where have those days gone?
Economic quandaries are not my specialty. I’m not an economist. I’ve never even taken a college-level economics course. However, I do have some common sense. Some may disagree.
From a common-sense standpoint, how can a gallon of milk be comparable to the price of a gallon of gas at my local gas station or convenience store? I’ve even seen a gallon of milk be 30 to 50 cents more expensive than the typical unleaded gallon of gas. I’m not a global economist, but I don’t understand at all.
The beginning of my thought pattern leads me to a simple question: From beginning to end, does it cost more to facilitate the process of the milk making it to store shelves or for gasoline to arrive at the service station?
Both processes are relatively time-consuming and reasonably expensive. With that being said, it seems ludicrous that a theoretically infinitely reproducible product, such as milk, could be as expensive as a finite product, such as gasoline. The simple view is that oil will eventually “run out.” Barring mutation or some drastic environmental change, cows are here to stay.
Unfortunately, the situation seems to be a bit more complex than that. It also involves a particular vegetable.
I have yet to find a reasonably complete explanation to curb my curiosity, but it seems that a few issues can be attributed to my milk vs. gas predicament.
Gas prices increase due to a demand for oil. In order to reduce the price of gas, ethanol is being added. Ethanol is made from corn. Farmers see the demand for corn increasing; therefore they increase the amount of corn they grow in order to make more profit. Most of the corn finds its way to the oil companies. In turn, the price of corn increases, forcing dairy farmers to spend more money to buy corn to feed their cows, effectively increasing the cost of milk and other dairy products. Also, the farmers that grew the extra corn had to decrease the amount of other crops, effectively increasing the price of other goods.
My synopsis? Corn farmers win. Dairy farmers still make money due to the raised prices across the board. Oil companies are spending more per barrel of oil, but charging more at the end of the process before the gasoline makes it to our gas stations.
The consumers? We lose.
Will our next president do something about it? Refer to my previous column about voting to see how I feel about it.
Rory Geraghty is a senior electronic media production major and a columnist for the Daily Kent Stater. Contact him at [email protected].