Oil prices are up again, threatening to take the wind out of the sails of the U.S. economic recovery.
Processors can't do much more than prepare for the storm and pray the government doesn't make the problem worse.
You could argue that high oil prices sent the economy tumbling in the first place. Remember the $2 per-gallon gasoline prices in the summer of 2000, especially in the Midwest? That marked the beginning of the recession. (Although now government wonks who haven't had to lay off anyone in the past two years are debating whether we were ever in a recession. Thanks for all your help, Washington!)
Before last week, oil prices already were up 40 percent in 2002. Prices jumped another 4 percent April 8 after Saddam Hussein threatened to halt oil exports from Iraq for 30 days to protest Israel's military action on the West Bank.
In the meantime, labor troubles in Venezuela also threatened U.S. supplies. Just a few months ago experts were saying the United States no longer was vulnerable to a 1973-style oil embargo, thanks to increased production from Venezuela, Mexico and Russia. Suddenly the experts are not so confident.
Every time oil prices spike you hear the same reactions: We need to cut our reliance on foreign oil. We need to conserve. We need alternative fuels. All are true, because all affect long-term demand. If this latest scare is more than temporary, you can be sure that some of those calls will be heeded.
Many plastics processors carry a heavy burden in these situations, because (although the relationship is neither direct nor logical), resin prices tend to rise along with oil prices. Not all processors can pass along price hikes to their customers. If anything, the recent trend of customers demanding annual price cuts and rebates makes processors' efforts even more difficult than they have been in the past.
Is talk of an embargo an empty threat? We hope so. It's hard to picture anyone rallying behind Hussein, and most oil-producing countries are extremely dependent on petroleum revenues. Until now most have been unable even to slow exports, much less turn off their spigots.
But the idea still sends a chill up the spines of processors who remember the chaos of the 1973 and 1979 crises — and even the blip that sent the economy reeling just two summers ago.