Oil, Gold and Silver On The Rise... What Does It Mean For Manufacturers?

Over the last few weeks I've heard rumors of $5 and $6 a gallon gasoline.  Well I'll be honest, it's been a little bit more than a rumor.

Just last night, Glenn Beck, the popular conservative talk show host ranted for about an hour on the end of cheap oil and what it means to the American people.  Of course Glenn did take a few breaks to talk about how the Middle East and Africa are going up in flames... but that's another story.

But getting back to the oil prices... Beck stated that for every dollar crude oil prices rise, we'll see a 2 cent rise at the pumps.  Which when you say it like that it doesn't sound too bad.  But to get to $5 and $6 a gallon gas, we would have to see quite a jump in crude oil prices. 

As of this morning in York, PA, a mid grade gallon of gas cost $3.13.  So to hit $5 a gallon we would be looking at an increase of $1.87 at the pumps.  For that to happen we are looking for around a $94 dollar increase in the price of a barrel of crude oil.

Maybe it's time to get some oil futures?

But this isn't just about oil...

Commodity prices have been on the rise for several years now.  Gold has been hitting record highs just about every other month for the last year or two.  Silver is finally on the march.

Pretty much any commodity you look at on a price chart is on an upward tick.  And of course the greatest barometer is that good old grocery bill!

So it's pretty apparent that we are in a full out bull market on commodities.  But what does all this mean for manufacturers?

All throughout the media and in Manufacturing Economy Daily news updates I've seen nothing but sunshine and lollipops news about how the economy is on the rise and manufacturing is making a great comeback.

Sounds great... but I'm not buying it.

With $5 and $6 per gallon gas on the horizon, commodity prices are only going to continue to go in one direction and that's UP!  It takes gas to cut timber, mine, grow food, and pretty much run our economy.  We're so dependent on oil it's sickening.

Did I mention yet that our dollar is continuing to plummet and the Federal Reserve continues to print more of it?  Don't believe me... go look at a 10 year US Dollar Index chart and tell me which way your dollar is headed.

So with soaring gas prices, food prices, health care costs, education costs, a devaluing dollar and consumer debt still pretty much out of control, I just don't see people buying lots of new toys, houses, cars or anything they really don't need.

What does this mean for manufacturing?  Well, when consumers aren't consuming there isn't as much of a need for the products that manufacturers produce.  Also the price of those products will continue to rise in effect driving the cost of goods in only one direction... UP!

So what should be taken from all of this?  Basically, we're not even close to being out of the woods yet.  And the last people I would take my economic and financial advice from would be the Federal Reserve and the media because they aren't exactly accurate at predicting the future of our economy.

As manufacturers, now is a time to proceed with caution.  Just ask yourself, what would another year like 2007 do to your business?

What would that look like?  Think about it for a second...

Not so good?  Well a wise man sees what's coming and prepares.  You either plan ahead or plan to fail.  So what's your plan?