GOLDEN VALLEY, Minn. - Gasoline and food prices seem to be moving in opposite directions in Minnesota. While gas prices are dropping at the pumps, the price of food continues to rise.
"The biggest driver of the prices is the Federal Reserve policy," said David Vang, Ph.D. Professor of Finance at the University of Saint Thomas in Saint Paul. "When the Federal Reserve has been increasing the money supply rapidly for quite a while and since most world commodities are priced in dollars, if there are more dollars chasing these goods, the price in dollars goes up."
However, the price of gas has been dropping dramatically. At the BP station in Golden Valley, the price dropped from $3.67 per gallon to $3.55 in just three hours on Friday. Gas Buddy co-founder Jason Toews said that is not the end of the moves.
"We are going to see gas prices continue to go down, probably another $.30-$.40 per gallon by the end of the year," said Toews. "We see this virtually every year since we (Gas buddy) started tracking gas prices back in 2000, gas prices going down in the fall."
Toews says the end of the summer driving season, restored refinery capacity and the switch to winter blends of gasoline are contributing to a cycle of supply and demand for gasoline. He expects prices to rise again in late January or early February as the driving season inches toward Spring.
Skeptics, with their ears to the election process, might assume the Obama administration had something to do with the relief at the pump, less than three weeks prior to the November elections. However, Toews said that is not the case.
"It does not matter if you are a Republican or a Democrat, whoever is in power, they are generally powerless to do much of anything, at least in the short term," said Toews.
At any rate, if it is cheaper to drive to the store, it may cost more to buy food when you get there. Dr. Vang blames the food price rise on a flood of dollars and a lack of rain.
"The Federal Reserve policy being very expansionary has been causing prices to go up, but the more local aspect here in the United States has been the drought, which has been very, very severe this summer," said Vang.
He pointed out the near record high prices for corn and soybeans and the wide connections between those crops and other foods in the American diet. When will prices level off?
"Those prices might remain high until we start getting better forecasts for weather for the next agricultural cycle," said Vang. In other words, not until next year.
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