Pumped up gasoline prices could soon be matched by bigger price tags on everything from clothing to house paint as a result of Iraq's invasion of Kuwait.
The Middle-East conflict has taken roughly 5 million barrels of crude out of the world's daily oil pipeline, a loss that is expected to touch countless businesses since virtually every industry depends on petroleum either to make or move the goods they produce.
Gasoline, home-heating oil, mortgage rates and airline tickets already are going up. The costs of new tires, plastic products and other goods for which oil is a key raw material may also rise, company executives surveyed yesterday said.
"I think what you have to look at is the overall impact, that all industries will be affected in some way," said Robert Villanueva of the National Association of Homebuilders.
Michael Boskin, chairman of the Council of Economic Advisers, estimated that a 10 percent increase in oil prices would translate into roughly a 1 percent rise in consumer costs. So far, crude oil prices have climbed some 30 percent since the Iraqi invasion.
The impact of an oil crisis is likely to extend beyond products directly dependent on oil for their production. Nearly 90 percent of all consumer goods in the United States are transported by truck, which raises the prospect that everything from clothing to grocery store prices could climb higher as truckers attempt to pass on higher fuel prices to their customers.
If truckers are successful in gaining federal approval for price increases, consumers are likely to feel the effect, said John Sauer, chief energy economist for Conoco.
Officials at Safeway, Borden, Frito-Lay and other consumer goods companies said no price increases were planned immediately but they all agreed that a prolonged oil crisis could force prices up.
"We're going to have to take a wait-and-see attitude, said James McCrory. "We just don't know yet."
Petrochemical products, used in the manufacture of paints, plastics, and synthetic fibers used in the clothing industry, will also "rise considerably" in prices, said Sauer said.
"Many of the raw materials in tires are derived from oil, which means that oil is a major cost component of our product," said Walter McClenny, a spokesman for the Goodyear Tire & Rubber Co. in Akron, Ohio. "If oil costs continue at higher levels, our prices will have to reflect those costs," McClenny said.
The impact of the disrupted oil flow is also rippling through the housing industry. Higher energy costs have fueled inflationary concerns, which in turn has led to a quarter-point rise in mortgage rates this week. That climb comes as particularly bad news for home builders already struggling with a nationwide downturn in sales.
In fact, a weakened demand could make it difficult for some industries to raise prices. For example, so far only three airlines -- Northwest, Pan Am, and Trans World -- have announced fare increases or surcharges to offset higher fuel costs. Yesterday, a Northwest spokesman said the airline would reconsider its charge, to take effect Thursday, if no other airlines act.
"It's impossible for any fare increase to stand across the board because traffic is so weak," said analyst Helane Becker of Shearson Lehman Hutton.
Still, the specter of steep hikes in crude oil prices casts a disturbing shadow across the consumer landscape.
"We are paying $28 a barrel for crude oil today, compared with $16 a barrel we were paying a month ago," said Conoco's Sauer, whose company is the oil-producing subsidiary of Du Pont Co.
"That is a $12 increase," much of which will flow into increased costs for consumer goods, Sauer said.
Gasoline prices rose 4 cents to 15 cents a gallon nationally, and 5 cents to 7 cents a gallon locally since the invasion began last week. Home heating oil prices, normally 7 cents a gallon below gasoline prices, have risen by 3 cents a gallon, sharply narrowing the car fuel-home fuel price gap. Home fuel prices can be expected to rise even higher in the winter months, Sauer said.
"Those people who want to get the petroleum product will have to pay a higher price, and those who don't want to pay a higher price will have to conserve," Sauer said.
Car companies generally are in a better position to weather the current oil crisis than they were in similar situations in 1973 and 1979. All of the U.S. automakers have high-mileage cars to offer even though they, like their larger Japanese competitors, lately have gone on a horsepower binge in their bigger vehicles.
But at least one of the U.S. Big Three, Chrysler Corp., is determined to take advantage of the current circumstances. The automaker announced yesterday that it is cutting $1,186 off of its new Dodge Shadow and Plymouth Sundance compacts and will sell the 31-mile-per-gallon cars at prices beginning at $7,600.
"We originally were advertising these cars as a good buy because they had air bags," said Robert Perkins, vice president in charge of Chrysler's Washington office. "But when this gas thing hit, it played right into our hands."