High Price Of Oil Raising Manufacturing Costs Across The Board

Surging oil prices are beginning to cut into the profits of a wide range of American businesses, pushing many to raise prices and maneuver aggressively to offset the rising cost of merchandise made from petroleum.

Airlines, package shippers and car owners are no longer the only ones being squeezed by the ever-mounting price of oil, which shot up almost $11 a barrel on Friday alone, to $138.54, a record.

Companies that make hard goods using raw materials derived from oil, like tires, toiletries, plastic packaging and computer screens, are watching their costs skyrocket, and they find themselves forced into unpleasant choices: Should they raise prices, shift to less costly procedures, cut workers, or all three?

The Goodyear Tire and Rubber Company is trying to adapt. Its raw material of choice now is natural rubber rather than synthetic rubber, made from oil. To sustain profits, it is making more high-end tires for consumers willing to pay upwards of $100 to replace each tire on their cars.

These steps have not been enough, however, particularly now that the cost of natural rubber is also rising sharply, along with that of many other commodities. So Goodyear has raised the prices of its tires by 15 percent in just four months.

"Our strategy is to raise prices and improve the mix to offset the cost of raw materials," said Keith Price, a Goodyear spokesman. "No one has predicted how long we can continue to do that."

Read the whole story here.

Comments

[owiseone]

It's not just manufacturing being pinched.

Food shortages will show up soon in the US. Many farmers have decided not to plant crops at all because of the expense of running their machines, buying fertilizer, seed, etc. These farmers are not counted in the "unemployed", but the lack of their work will certainly show up in our economy soon.

[freecasey]

Read all about it! Your senator or congressman should have ... they got the lowdown two years ago. So the next time you see them grill an oil exec or say drill ANWR or blame demand in China or India, they're full of s**t.

http://www.senate.gov/~levin/newsroom/supporting/2006/PSI.gasandoilspec.062606.pdf

[freecasey]

PEOPLE! This is not about oil companies. This is not about supply and demand. Goldman Sachs wants you to believe this is a supply and demand issue. It's not. This is about deregulation and speculation. The Senate investigated the rigging of the oil market by speculators in the summer of 2006 " and concluded that there was no supply and demand problem with oil. Their conclusion was that speculators were responsible for a 70 percent overcharge in the price of oil in the months leading up to the summer of 2006.

REPEAL the Commodities Futures Modernization Act of 2000 and string up Phil Gramm for treason and the deaths of anyone starving because of the food shortage.

P.S. Department of Energy, last month: Drilling in ANWR will cut the price of a barrel of oil 75 CENTS!

[ornovscot]

The increase in the price per barrel of petroleum has multifaceted causes.

Speculation and the investment in commodities futures are phenomena that exacerbate a situation precipitated by many variables. As stocks decline, more investors put their money in commodities.

Instability in the Middle East and the likelihood that the Administration or Israel will attack Iran constitute some of those variables.

The growing economies of India and China increase demand for petroleum and petroleum based products.

Another variable turns on the value of the U.S. dollar relative to other currencies. Since 2001 the value of the dollar steadily has declined. This decline turns, in part, on the expenses arising from the wars in Iraq and Afghanistan. As well, the numerous interest rate cuts made by the Federal Reserve and the infusion into the economy of a considerable amount of liquidity have caused the dollar to decline.

Related to the decline of the dollar is the concomitant increase in the price of various commodities.
But as the dollar declines in value, driven in part by an increase in the supply of dollars, the price of commodities continues to increase. Unlike the supply of dollars, the supply of commodities is not elastic.

One way to stop the decline in the value of the dollar is to stop the war in Iraq and to call on Congress to oppose any attempt on the part of the Administration to expand the war to Iran.

[mouselion]

So, why can't the oil companies take a cut in profit earnings which are at record levels?

[Vyvjala]

Its called fu#king GREED.....................

[themodernleader]

The unprecedented inflation of every necessary commodity and product from that commodity is not being reflected in data being reported to the American people. The American people have awakened to the fact that the economic and other data emanating from the American government is not trustworthy. A dishonest reporting system can have no other than dishonest policies.
Trust in our goverrnment must be restored by bringing to justice or cashiering dishonest governmental employees and bringing into office the original American patriot who has at the center of his management function the searching and reporting of the truth as an absolute badge of honor.

[pookiepunkin57]

There is one very obvious step Congress could take to relieve the cost of fuel AND help gas emissions . It is a solution that could actually be done, legislated & put into effect very quickly & would have an almost instant effect on the prices of everything- bread, milk, gas- everything! We are being painted into a smaller & smaller corner, we HAVE to do something. The solution of which I speak?
Pass legislation that requires all big corporations (Wal-mart, Kmart, Sears, JC Penney, etc.) to transport via train instead of semi-trucks. This is more than a band-aide that would help for a while & fall off & be back where we were. It is a permanent help. It could be done quickly & it would help immediately & long term.
Such legislation would help every family in this country & global warming. The drop in emissions of these semis would be incredible & immediate. It would crash the demand for crude oil in the USA. Which would crash the price of gas & diesel, greatly lowering the price of everything you & I buy. Part of the cost of everything we buy is affected by gas/diesel because it has to be transported to our given areas.
It's time to make them do whatever has to be done to stop this insanity. There is no shortage of oil, gas or diesel. There are rich oil/energy tycoons who want to be richer oil/energy tycoons. Then there is the rest of

[robin50]

How much does the CEO of Costco make. People are struggling to keep a roof over their head, food on the table, and gas in the car to go to work if they still have a job. The CEO of Costco decides to buy a large inventory of luggage at this time? Is it me or does anyone else think that perhaps luggage is not going to be flying off the shelves right now.

[Redrover666]

That's right. And I think the best thing we could do is follow the liberal democrat stand and refuse to let anyone build reactors, drill any wells or build a new refinery. That's the ticket!

[Paul]

With the price of oil at record highs and no relief in sight, what company in its right mind would build a new refinery? Gasoline consumption in the US is headed downward - hopefully for good. The price level now is permanently destroying demand for gasoline - and this is a good thing.

In any case, Motiva (Shell) is expanding one of their refineries in Texas so as to double its gasoline production. That's a gutsy move in the face of a declining market.

As for nukes, you are right. That is the one technology that will give us an alternative energy source for a reasonable investment. We need to act rationally about the safety and waste issues, but these can be solved.

As for drilling new wells, it won't make a big enough difference, soon enough. If all the oil in ANWAR was available today, it would be less than 1% of our current consumption.

It will be much easier to lower oil consumption by mass transit and better mpg than it will be to bring new sources on line fast enough.

[gakabani]

The result is going to be hyperinflation

[KillTheMessenger]

Only if the government starts printing $1,000,000 and $1,000,000,000 notes. Otherwise it's modest stagflation, at best.

[MetalCanuck]

Modest? I don't think so, we are already in stagflation. I saw my grocery prices rise 40 percent in 1 year and my pay hasn't come close to making up for it.

[mouselion]

How much of a cut in profits could the petrochemical industry make and still be doing alright? They may not be the single root cause, but they certainly a very major player. They make record profits -- but claim they need to for alternative energy research and building refineries/infrastructure. They already get huge tax breaks for the purpose of research and development. Now is the time for Big Oil to do the economically expedient thing and >Cut Their Profit Earnings Down

[Redrover666]

Any reason you can think of why they ought to decide to make less money.

Other businesses make far more profit in relation to investment. Should we insist they too start making less profit? Research and development tax breaks, you're thinking of the pharmaceutical companies.

The economically expedient thing to do is they continue making money and we condescend to drill an oil well or two and perhaps build a refinery. We're going to do it sooner or later, it's just a matter of how low we are brought first.

Imagine that... Our president begging an Arab potentate and being ridiculed by a banana republic. If Obama wins the election, he'll go groveling too.

[PierreLeClerke]

Not one item, NOT ONE ITEM we taste, touch, wear, work with, play with, sleep in, or live in, is not directly effected by the unbridled price of Oil.
This fact should be more than enough to wake up even the most stubborn free market cheerleaders to the reality that never before in human history has so much wealth been siphoned so quickly from the tables of so many to the bulging pockets and blood soaked hands of the powerdrunk few.
Every effort has been made by the current criminal cabal at the helm of this government to shovel our treasure into their masters vaults and to provide cover for the innumerable crimes and manipulations
that continue to serve their insatiable appetites.

[KillTheMessenger]

That was always the case. If it takes high oil prices for people to turn into "environmentalist", so be it.

[MetalCanuck]

The Fed is destroying your economy JUST LIKE RON PAUL SAID!! People need to wake up, you are being pillaged and robed ny the bankers. The dollar is collapsing and god help you and us in Canada when it does.

THIS IS NOT AN OIL CRISIS, this is a currency crisis. EVERYONE please watch this video and you will know whats happening.

http://www.youtube.com/watch?v=jqz9J4hxh3k

(Listen to the second guy on this video, the first one is an idiot.

http://www.youtube.com/watch?v=yvCcBILF7ow&feature=related

(This one has peter schiff on it, this is a GOOD one and it explains a lot.)

http://www.youtube.com/watch?v=4n3g5lUgkWk

[BobSF94117]

"One of the surprises," said Patrick Jackman, a senior economist in the consumer price division of the Bureau of Labor Statistics, "is that the oil price surges of the 1970s passed through fairly quickly into consumer prices, and this time that is not happening."

Just wait until AFTER the election...

[ErnestineBass]

Apples and oranges.

During the 70s, this country still had a unionized manufacturing base and an agricultural sector that produced more than 75% of the durable goods and foodstuffs we consumed. When the price of oil spiked, manufacturers and farmers simply cut back on production rather than raise prices.

We no have that "luxury".
All we produce nowadays is debt.

[nanotubz]

And this is a surprise because? Gasoline, lubricating oil, and diesel are just the most obvious oil product to the public. Except for food, isn't much in our daily lives that isn't reliant upon oil as a precursor, what doesn't rely on oil for transportation from the source to our homes. This is just maybe only the start.

[myshadow]

You cannot be kidding. There isn't anything we touch that isn't impacted by the price of oil. That coupled by the price of staples in general, the real inflation is being lied back. The government will take a huge hit when entitlements have to adjust for COLAs. There is another bubble here, the LIE that the inflation rate is a fraction of what it is in reality.

[ErnestineBass]

"Except for food..."?

You're f**king kidding, right?

Ever hear of something called the petrochemical industry that produces the pesticides, herbicides and fertilizers used in farming? Then there's the small matter of the diesel fuel used by all those tractors and combines and refridgerated trucks that bring our food to market?

EVERYTHING WE DO IS DEPENDENT ON OIL.

[Paul]

Here's an idea: just make tires, OK?

Somehow when I go to the tire store two $50 tires cost me $150.

Stop giving me choices I don't want or need.