Don't panic: Food, gas prices stable

www.pantagraph.com Friday, March 21, 2003
By Chris Anderson Pantagraph staff

BLOOMINGTON -- Local consumers should see little impact after the start of war -- gas prices are stable and food prices are not expected to rise.

David Sykuta, director of the Illinois Petroleum Council, promised drivers fuel at reasonable prices as long as consumers don't start panic-buying.

"Drivers don't need to panic" because of the war, said Sykuta. "We get very little crude oil from the Middle East. Most of it comes from Canada, Mexico, Venezuela, Saudi Arabia and Nigeria. And our strategic oil reserve is filled to the tip-top."

Central Illinois grocers said the war should have no effect on food prices, making hoarding unnecessary. Most food consumed in the United States, except some fruits and vegetables, gets produced and processed in America.

"The short-run impact -- if the war goes as planned -- will be minimal on food prices," said Rick Whitacre, Illinois State University agricultural economist. "If the stock market continues to strengthen and oil prices continue going down, it should restore consumer confidence. If you're not paying $2 per gallon to fill up your SUV, maybe you can go to Jim's Steak House for dinner."

Gasoline prices in the Twin Cities Thursday stayed stable at around $1.60 per gallon. Sykuta, driving from Springfield to Chicago, found prices steady to 1 cent lower.

He noted crude oil prices have dropped recently because of anticipation of a short conflict in Iraq. Prices recently fell to about $25 per barrel after hitting $32.49 in December.

Sykuta said, "Fear and rumors are powerful forces. I think owners of all 5,000 service stations in Illinois will be restrained. I'm optimistic it will stay under control."

Whitacre noted farmers facing spring planting duties also could benefit from lower petroleum prices. A drop in diesel prices from $2 per gallon to $1.30 or $1.40 per gallon could result in substantial savings, he said. Lower petroleum-based fertilizer prices also would save farmers money, he said.

The war's impact on grain prices remains less certain. Brian Basting, an economist with Advance Trading Inc. in Bloomington, expects some initial market hesitation while traders determine exactly what's happening.

Grain markets reflected that situation. Traders described Wednesday's trading as "war-subdued" with corn futures prices up about 1 cent per bushel and soybeans down about 3 cents. Thursday's futures prices ended with corn 2 \ cents higher and soybeans 4 cents higher. Solid weekly exports, not the war, fueled the increase.

"Spring weather and acreage reports will be a much more important impact on grain prices as long as the war doesn't interfere with international commerce," said Whitacre.

Pete Manhart, owner of Bates Commodities Inc. in Normal, noted the U.S. doesn't trade grain with Iraq. Egypt, however, buys wheat and other grains from the U.S., a trade route that could become physically disrupted, he said.

Basting and Whitacre said U.S. grain trade could get a significant boost if the war ends quickly. Iraq will need food assistance -- action that would bolster confidence in worldwide grain trade, they said.