High gas prices trickle down

  • Associated Press
  • Monday, July 5, 2004 9:00pm
  • Business

What do carpet, tires and paint have in common?

They are just a few of the household items getting more expensive due to the high cost of oil and natural gas, important raw materials for these products and the source of energy needed to manufacture and ship them.

The price increases for such goods aren’t ubiquitous and are relatively small compared with the 30 percent rise in the price of gasoline from a year ago. Yet they illustrate how higher energy costs trickle through less obvious corners of the economy.

Builders Carpet Outlet of Ann Arbor, Mich., recently began selling brand-name nylon carpeting for about $1, or 4 percent, more per square yard, reflecting wholesale price increases imposed by major manufacturers such as Shaw Industries Inc.

The Goodyear Tire and Rubber Co. and Cooper Tire &Rubber Co. have each raised prices twice this year because synthetic rubber is made from chemicals derived from oil.

Paint manufacturer Sherwin Williams Co. of Cleveland, framed the impact of rising energy prices this way: For every 10 percent increase, the raw material costs for a gallon of paint go up more than 1 percent. That nudges up the retail price, spokesman Bob Wells said.

“We are starting to see more and more of this rippling downstream,” said Kevin Swift, chief economist for the American Chemistry Council, an Arlington, Va.-based trade group whose membership include the largest producers of plastics, coatings, fertilizer and other petroleum-based products.

The producer price index for finished goods – a measurement of wholesale prices – increased 0.8 percent in May, the biggest jump since March 2003, the Labor Department reported in June. And rising prices for a cross-section of consumer goods and services, from milk to lumber to document shipping, have raised concerns about creeping inflation.

In an effort to head off inflation, the Federal Reserve on Wednesday raised its key short-term interest 0.25 percentage point.

“Tom Brokaw has an item on every night about the cost of gasoline, but I think that’s the tip of the iceberg,” said Norman Davis, director of global energy purchases for International Paper Co., the world’s largest forest products company and a large consumer of fuel oil, used to run its plants. “I think people are so focused on the price of gasoline, that they don’t see the other stuff.”

Marshal Cohen, a senior retail analyst at NPD Group Inc., a market research company in Port Washington, N.Y., expects higher energy costs to reverberate through “the price of everything from socks to hats” by next fall.

Chemical maker DuPont last month raised the price of a resin used to make packaging and adhesives, a move spokeswoman Heide Rowan attributed to increased demand and higher prices for two raw materials: ethylene, derived from natural gas, and naphtha, derived from oil.

Gregory Reive, the sales manager at Builders Carpet Outlet, said the store raised prices for nylon-based carpeting in February and again in May. The carpet retailer has also introduced a $25 delivery charge to cover higher transportation costs.

“We don’t hide it either,” Reive said. “We let people know what’s going on.”

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