When oil prices skyrocketed at the beginning of the summer, consumers and politicians screamed foul. A few of the squeakiest wheels quickly got greased: Diesel prices came down, placating truckers, and oil companies found a way to cut prices in parts of the Midwest where consumers briefly paid more than $2 a gallon for gasoline.
Fuel prices have dropped a bit but remain high. But consumers treat the problem more as a nuisance than a catastrophe. Why? One reason is political. The issue didn´t resonate for either side on the Bush vs. Gore campaign — both candidates are vulnerable. Gore is part of the administration that´s done nothing about the problem, and Bush prefers not to bring up an issue that inevitably shines a spotlight on his close ties to oil companies.
Meanwhile, all the experts have reassured consumers that prices will drop after the busy summer driving season, or after the Saudi Arabians push OPEC to increase output.
Now there are rumblings from the Organization for the Petroleum Exporting Countries that output may not increase enough to bring prices down, particularly as oil companies start to shift production to producing fuel oil.
Processors are hurt by high oil prices in several ways. Direct effects include higher transportation and energy costs. Indirectly, there´s an imprecise but significant correlation between oil and resin prices. Plus, processors that serve the auto, truck and recreational vehicle industries suffer when higher fuel prices hit those markets.
It´s testament to the strength of the North American economies that high fuel prices have not created runaway inflation or a recession. But the situation, coupled with a big stock market correction, a labor strike or economic trouble with a major trading partner, could trigger problems.
Processors should keep an eye on the results of OPEC´s scheduled Sept. 11 meeting to see if they can expect any relief, because Washington doesn´t seem to care.