Wednesday June 07, 2006

High cost of oil could put many jobs at risk

peakoil.com -> usatoday.com :

The rising cost of oil has put a squeeze on the companies that use oil as an ingredient for their products. Chemicals made from oil are used by companies to manufacture many products consumers rely on every day, such as plastic bottles, aspirin, lipstick and deodorant. The direct impact on consumers has been minimal, because manufacturers, faced with strong global competition, are unable to pass along all of the added costs to customers. But the impact on manufacturers and other companies that use oil-based ingredients could be significant, causing a ripple effect throughout the economy. As firms are faced with rising prices and see their margins cut, they may have to cut back on production, or maybe even cut jobs or shut down. Wellman CEO Tom Duff says high oil prices are "an issue that extends beyond just the gas pump."

Continental Tire announced last month that 481 employees will lose their jobs July 7 when it will drastically reduce production at its plant in Charlotte, in part a response to higher raw material costs. The company has warned it may close the plant entirely. Tires are made with synthetic rubber produced with a chemical derived from oil. Approximately two-thirds of Goodyear's raw material costs are related to oil, spokeswoman Tricia Ingraham says. The company's raw materials prices nearly doubled from 2004 to 2005 to $5.6 billion.

Wachovia's Schenker says the squeeze on companies could become more severe if oil prices exceed $70 a barrel for a considerable period. Making matters worse, many companies are being hit with higher energy prices on a number of fronts. Not only are prices of oil-based goods increasing, but so are transportation costs and electricity prices.

Wellman's Duff warns that high energy costs will likely pose a challenge to companies for many years. And although consumers might not be paying now for the increased costs, they may end up paying for it later, in the form of lost jobs when companies start losing money and are forced to shut down, he says. "The consumer doesn't want to pay more for the end product," Duff says. "But at the end of the day, (the high cost of energy) gets pushed back to that consumer, whether they recognize it or not."

See also :

1. Jobs at risk as energy costs rise
2. Ford to cut up to 14 plants and 30,000 jobs
3. GM to cut 30000 jobs
4. Fuel hikes could cost 60000 Indonesian jobs

(2006-06-07 13:04:05 SGT) [Energy] Permalink

Most popular blog postings on lowem.log :

1. Singapore SIBOR rate falls to 0.94% in Nov 2008, lowest since Jul 2004
2. Baltic Dry Index falls 93% as shipping rates plunge, signalling global economic collapse
3. Singapore SIBOR rate falls to 1.31%, lowest since Nov 2004
4. Singapore SIBOR interest rates fall to 1.5%, lowest since Dec 2004
5. Live spot gold price quotes chart on COMEX
6. 2010 Honda Civic Hybrid preliminary specifications released
7. Fuel prices seen stoking Malaysia inflation in 2008
8. How to insert currency exchange rates into Google Spreadsheets

Featured articles on lowem.log :

1. ABC Guide to Beating Inflation in Singapore and Elsewhere
2. Singapore inflation rate hits new 26-year high of 7.5% in Apr 2008
3. Baltic Dry Index falls 93% as shipping rates plunge, signalling global economic collapse
4. 67000 China factories closed in H1 2008 as global economic collapse takes hold
5. 2010 Honda Civic Hybrid preliminary specifications released
6. Peakoiler buys 2008 Honda Civic Hybrid FD3
7. NYMEX crude oil recovers from $32.40 low after 2.2 mbpd OPEC production cut announced
8. Singapore SIBOR rate falls to 0.94% in Nov 2008, lowest since Jul 2004