Will the High Cost of Oil and Low Value of the Dollar Effect Gadgets?

ipodoil.jpgIf you’ve been paying attention to the news at all, you’ve probably heard about how expensive the cost of a barrel of oil has gotten–topping $94 as I type this. Another thing you may have learned about on the news (though it is less likely) is that the US dollar is at it’s weakest in a very, very long time. In fact, a quick check of the exchange rates (again, as I type this) at XE.com shows that the USD is still trailing the Canadian dollar by about five cents. Not a lot, but we’re still weaker than the Canadian dollar!

So, what does this mean for gadgets? It could mean nothing, but then again, gadgets do contain a lot of plastic, which is a petroleum product and gadgets do cost money to buy. What this may mean eventually for us is more expensive gadgets. In fact, it’s a little surprising that we haven’t seen at least small price jumps in the years since oil began it’s astronomical rise and the dollar’s long fall. However, there are certain physical laws when it comes to money and they can’t be ignored forever.

Here’s how price jumps will work when they come (and they will):

As the cost of oil goes up, that cost will be passed on to people producing plastic from the oil. The cost of that plastic will then have gone up for the manufacturer of electronics. Then that company will hike prices to the distributor who will then hike up the prices that we will have to pay to get the electronics. Since the US dollar is so weak, it’s likely that the costs and respective prices will go up even higher than they would have were it just the oil we were dealing with.

Sadly, this is the basic physics of money and capitalism. In order to make the same amount of money you did yesterday (or more) you have to charge more than what you paid for the gadget. If the cost of that gadget goes up for you, you’ve got to pass that loss onto someone else or you’ll get your “Good Capitalist Club” card revoked at the next quarterly clubhouse meeting.

So, in the end, it’s just a matter of time before we all see more of our money gone for the same amount of gadgety goodness.

[FT.com]

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1 Comment »

  1. tim said

    yes this is correct. high gas prices will kill off blue ray and dvd. every format on the market will die. type in “world wide oil shortage” and read the horror stories. to survive you better learn how to plant a garden and can food.

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