Before your groceries make it to your kitchen or all the way to your toilet after you eat them, they move through a series of logistical steps, including a connected system of organizations, production, and transportation. Each of these steps involves fuel costs that companies pass on to you, the consumers.
But first, let me tell you something I know about you. Before your groceries make it to your kitchen or all the way to your toilet after you eat them, they move through a series of logistical steps, including a connected system of organizations, production, and transportation. Each of these steps involves fuel costs that companies pass on to you, the consumers.
In case you didn’t notice, I just explained to you what logisticians call Supply Chain. Supply Chain involves four main components: Demand Management, Supply Management, Sales and Operations Planning, and Product Portfolio Management.
For that podcast, I focused on Product Portfolio Management because this step includes transportation and delivery of our groceries within 10 miles of our houses so we don’t have to drive 10 hours to purchase them at the manufacturing plant.
Each time you pass by your neighborhood gas station, you see the price of the gallon increasing. Imagine you stop there to fill up your tank. Our tanks do not get any bigger but it costs more and more to fill them up. Even if you don’t drive, these small increases impact how much money you save. It all starts with your trips to the grocery stores. What you could purchase with $100 last week would require $12 more to buy the same items this week. This is because the costs to transport these goods to your neighborhood stores increase due to the price increase of the gallon of gasoline. The prices of the goods you purchase relate to the costs of transportation of these goods to your stores, and the costs of such transportation relate to how much it takes to fuel these big trucks.
Some of us who travel by air see airfare increases. Again, it is all due to an increase in gas prices because when the price of the gallon increases, it costs more to fill up the planes’ tanks and run the different airports’ operations. Rental property companies increase rent prices because, when the cost of the gallon increases, they also pay more to keep the lights running in the lobbies, hallways, and parking lots. Water, internet, and light bills also increase because, adding one cent on the gallon, the municipal electric utilities purchase gasoline at the inflation prices to operate their power plant and guess what; they pass on these costs to you.
When the price of the gallon increases, everything else increases because gasoline is the oil that greases the wheel of supply management. Whether you Uber, have your groceries delivered to your door, or pick up your pizza, your purchasing power decreases a lot.
As you can see, the increase in the price of gasoline, or any other basic good for that matter, profits big companies while taking away chunks of money from our income. Essentially, when the price of gasoline is increased just by one cent; our shopping budget is reduced by $12.
In summary, the increase in the gallon of gasoline has a ripple effect on the prices of goods and services across the board. This is because transportation costs, especially for big trucks, increase when fuel prices increase, increasing the cost of goods. Airfare, rents, water, internet, and electricity bills also increase due to the added cost of gasoline. Essentially, gasoline is the oil that drives the supply management process, and when its price increases, everything else follows suit. As a result, consumers’ purchasing power decreases, and they must pay more for the same goods and services.
Bobb Rousseau, PhD
Host of Apostrophe Podcast