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Congress Hears from Farmers on Impact of Higher Fuel Costs

posted on November 25, 2005


Federal authorities this week said progress is being made in restoring offshore natural gas facilities shut down by hurricanes. But officials also said natural gas prices will remain high as demand outpaces supply.

Output at the offshore operations has improved by 22 percent of capacity in the past three weeks. That's important because one-fifth of U.S. natural gas supplies come from the Gulf Coast.

The high cost of energy isn't limited to natural gas. From fertilizer to plastic to diesel fuel, consumers are feeling the pinch of record-high petroleum-based energy costs.

And though prices at the gas pump fell to a five-month low this week, traveling over the river and through the woods to Grandmother's house still will cost more in 2005 than ever before.

 

Congress Hears from Farmers on Impact of Higher Fuel Costs

According to the Energy Department, the average price of regular unleaded gasoline now stands at $2.20, a decline of nearly 10 cents from last week. That's the lowest price since last summer, but still is 25 cents more than last year and is a record for the Thanksgiving holiday week.

Consumers of diesel fuel may not be feeling thankful at the pump either. The weekly price of diesel fell nearly nine cents to $2.51 a gallon& its lowest level in 15 weeks but still up 40 cents from a year ago.

And in recent weeks, lawmakers have been hearing from irate constituents, including farmers, about the prices at the pump.

Ryan Neibur, Burlington, Colorado: "On my farm fuel expense has gone from $60,700 in 2004 to over $135,000 in 2005."

Higher fuel prices drive up other input costs, as well. Natural gas, a key ingredient of anhydrous ammonia and liquid nitrogen, has increased in price more than 200 percent over the past three years. And concerns are mounting over the cost of fertilizer next spring.

Ryan Neibur, Burlington, Colorado: "In 2003 we paid $295/ton compared to $495/ton in 2005."

The Agriculture Department estimates fuel prices will increase at an annual rate of 40 percent in 2005. While economists note the last time there was a 40 percent change in fuel prices was in 1980, USDA officials are confident in the health of the rural economy.

Keith Collins, USDA Chief Economist: "The saving grace here is that we've had very high gross cash income in 2004 and again in 2005."

Optimism aside, Collins predicts higher fuel prices will contribute to lower farm income in 2006, prompting one lawmaker to call for relief for America's farmers.

Sen. Ken Salazar, D - Colorado: "What are we doing in terms of trying to deal with, what I consider to be, an emergency crisis for farmers and rancher across the country?"

Keith Collins, USDA Chief Economist: "To look particularly at farmers and suggest that you're going to write them a check to offset their higher energy costs, I think, is a difficult proposition at best."


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