Gasoline prices are rising and coffee is rising even faster. Gasoline prices will stabilize, but the same cannot be said for coffee. The full story can be found in an Associated Press article that we found in the Seattle Post Intelligence.
The price of gasoline rose due to a feared supply disruption caused by the political turmoil in Egypt, Libya, Syria and Yemen. President Mubarak of Egypt has stepped aside and NATO is attempting to influence Colonel Kaddafi to cede power in Libya. As the region begins to stabilize, the risk of a supply disruption decreases and the price of oil and therefore gasoline will fall.
Coffee prices are more complex. An increase in demand from the rising incomes in China, plus inclement growing conditions in some major production areas has caused demand to rise and supply to fall simultaneously. While the supply disruption appears temporary, demand is predicted to continue its rise. Coffee, it seems, is a normal good.
Over the long run however, the supply response to higher prices will be greater for coffee than it is for oil. It is easier to plant coffee bushes than it is to find extractable oil reserves. So for the short term, bet on coffee. In the long run bet on oil.
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