Price of Oil Drives Up the Cost of... Gum?
You're not in the aviation or shipping business so you're not expecting the near record price of oil to have much of an impact on your business. That's a mistake, according to a number of respected news outlets today.
Marketwatch.com is warning that everything from cosmetics to food to artificial limbs will cost more due to nearly $100 a barrel crude prices. The article offers some telling examples:
- Wrigley - traditionally conservative on pricing - raised prices 10% in the second and third quarters on its popular gums and candies.
- Lattes and Frappuccinos laced with lots of milk prompted prompted Starbucks Corp. to boost prices by about 9 cents a beverage earlier this year. In October, Starbucks added another 5 cents, on average, to beverages to cover the rising costs of labor and energy.
- Cooper Tire & Rubber raised its tire prices 5% in June and another 4% on Oct. 1
"This unprecedented situation is simply not one that can be managed through the enhanced efficiencies and increased productivity that we are continually implementing at all levels of our company."Meanwhile, the NY Times is likening today's oil prices to the oil shocks of the 1970s and 1980s, but claims that today's troubles are "fundamentally different... with broad and longer-lasting global implications." The Times points out that while previous oil shocks were caused by supply troubles, such as the war between Iran and Iraq in the 80s, the issue today is rising worldwide demand. Supply issues come and go but no one thinks it is likely that, with the Chinese and Indian economies continuing to grow rapidly, demand will decrease anytime soon.
In a separate article the Times also notes that high gas prices, over $3.00 a gallon on average across the country this fall may lead to decreased consumer spending during the all-important holiday shopping season.