Nickled and Dimed to Death

Last week I wrote about the precious penny, so this week I’m going to go bigger and write about nickels and dimes.  But I want to start where I left off with some of my reminiscences about how things used to be when prices went up.

There was a time when we got angry about the jump in food and energy prices, say when gasoline went up two cents a gallon, or a pound of ground beef went from $1.98 up to $2.01. 

Well, those days are now long gone.  Today we see the prices of most commodities going up five to ten percent almost every time we go shopping.  The days of penny increases are gone.  Of course, the title of this column, “Nickeled and Dimed to Death,” is a metaphor for that cost creep phenomenon.

I love licorice, and we buy black Twizzlers about once every two weeks.  When we started buying them at Wal-Mart about three years ago, they cost $1.50.  Then they jumped up to $1.68, and now they’re priced at $1.88 for the same package. We pay it, but we are not happy about it.

There is another change that we see only if we really closely examine the products that we buy.  This one is even worse!  While the prices are going up, the quantity is going down.  Here are some of the examples.

Coffee, which used to come in one-pound bags or cans has gone to 13.5 ounces and increased in price at the same time.  Sugar used to come in five- or ten-pound bags, but now the smaller bags are reduced to four-pounds and they are priced at about one-half the cost for the ten-pound bag

Produce is also subject to wild price swings, mostly upward.  Some of the fruits and veggies are priced by the unit instead of by weight.  If a cucumber is priced at $1.00 then all of them should be approximately the same size. But no, the size varies widely.

On our recent trip to the produce department, Iceberg lettuce was priced at $1.50 per head, while cabbage was priced at $.64 per pound.  I weighed two different sized heads of lettuce and the difference was over 4 ounces while the price was exactly the same for either head. The cabbage heads also varied in weight, but the difference was accounted for in the price per pound.

I wrote a column back in May of 2006 about gouging at the pump, and I was critical of people for whining about the price of gasoline.  We had just completed a 1,600-mile trip and paid an average of $2.82 for a gallon of gas.  I also stated that the price was pretty close to the cost in October of 2003 - $2.68 per gallon.

I certainly cannot boast of a static price between then and now.  I’d love to see gas at $3.00 again, but I doubt that I will.

However, the price of gasoline is only a minor issue, because it affects personal driving, mostly for pleasure.  The real fly in the ointment is diesel, the fuel that powers 95 percent of our commercial vehicles.  It is priced even higher than gasoline, generally 10-15% higher per gallon.  That fuel is what really drives the prices up, because most of our retail products and food are transported by diesel-powered eighteen-wheelers.

 What really rankles is that all of this is taking place while we are told that there is little or no inflation.  How can that be true when our costs keep going up every week?

All of this gradual creep—and we are seeing it mostly in the price of gasoline—is part of a policy called incrementalism.  It has been used in politics just about forever, and it is a very effective means of gradually implementing changes that would be unthinkable if done overnight.

So, who is responsible for the incrementalism we are experiencing?  Some will say it is “those greedy Wall Street speculators.”  Others will counter that it is being caused by “big oil” since prices are somewhat driven by transportation cost of the products we buy.

Still others blame politicians who want to drive the cost of energy—especially fossil fuel energy—up to make alternative energy sources more attractive. To remain neutral I leave it to you to figure out who those politicians are.

Whoever is to blame—and I tend to place the blame with all three—there is good reason to think carefully and listen to all the political propaganda prior to the November election.  It is my studied opinion that prices will continue to rise for all commodities until we resolve our energy issues, and the current alternative energy sources, solar, wind and battery/electric are not the answer.

Regardless of what the present spin on energy is, the truth is that we have far more fossil fuel (oil and natural gas) than we are being told, and it is plenty to keep us at full power for decades if not centuries. I’ve seen credible estimates that put our domestic petroleum reserves at a 250-year supply at today’s usage.

One of the best quick fixes that could be started immediately is conversion of the big trucks from diesel to gas.  No, not gasoline, but natural gas.  We have an abundance of it, and I understand that engine conversion is not as difficult or as costly as you would think. Some trucking companies have already begun to convert due to the high cost of diesel. 

One thing is for sure… Nothing will change very soon, but the current mantra, “We can’t drill our way out” is certainly no answer.  That was also said 30 years ago, and where would we be if we had at least started to drill more way back then?

Something must be done, and soon.