(March 13, 2008) – The Department of Labor announced this morning that the U.S. Import Price Index advanced 0.2% in February, as a 0.6% increase in nonpetroleum prices more than offset a 1.5% downturn in petroleum prices. Prices for U.S. exports rose 0.9% in February after increasing 1.2% the previous month.
The reason for the relatively benign number is the 1.5% decline in oil import prices for the month. All other imports increased 0.6% for the month. Rest assured that we will see a big number in March, driven by $110 oil prices.
The other noteworthy figure is the 4.4% increase in farm export prices. This is driven both by the increase in oil prices–through fertilizer costs–and the impact of mandatory ethanol use on corn, grain, and meat prices. As Walter Williams points out in a recent townhall.com article, it takes 450 pounds of corn to produce the ethanol to fill one SUV tank. That’s enough corn to feed one person for a year. Plus, it takes more than one gallon of fossil fuel — oil and natural gas — to produce one gallon of ethanol. After all, corn must be grown, fertilized, harvested and trucked to ethanol producers — all of which are fuel-using activities. And, it takes 1,700 gallons of water to produce one gallon of ethanol.