Oil Prices Raise Cost of Making Range of Goods
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
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.”
The sense that many companies may be hitting a wall is palpable. Corporate profits peaked last spring and have
shrunk since then, Moody’s
reports, drawing on Commerce Department data.
The housing crisis and the weakening economy are big reasons, but oil prices are adding greatly to the